Macro1_PS5_take_home_exam - Macroeconomics 1. Master APE....

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Unformatted text preview: Macroeconomics 1. Master APE. 2010-2011. PS5 : Take home exam. Prof. Xavier Ragot - Gilles Saint-Paul / T.A : Eric Monnet This problem set is a take home exam due Thursday, October 21. Since we will correct it together in class (some of you will present their results), papers must be handed at the beginning of the course. If you cannot attend class this Thursday ; send me your results by email before class ! Work with another people and give me one paper for two. [email protected], drop me an email if you have questions or set up an appointment during the week. 1 Diamond Overlapping Generations Model To work on this exercise, you can use your classnotes on overlapping generation models, and Chapter 2 - part B of Romer's textbook for example. Part 1 . Consider the Diamond overlapping generations model. L t individuals are born in period t and live for two periods, working and saving in the rst and living o capital in the second period. Assume population is growing at a constant rate, n , and technological progress occurs at exogenous rate g . Markets are competitive and labor and capital are paid their marginal products. There is no capital depreciation. Utility is logarithmic with individual discount rate > ρ >- 1 . U = log ( c t ) + 1 1 + ρ log ( c t +1 ) The production function is Cobb-Douglas , with output (Y), capital (K), labor(L), and 'knowl- edge' or 'e ectiveness of labor'(A) to which g applies : Y = F ( K,AL ) . Inada conditions apply....
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This note was uploaded on 01/12/2011 for the course ECO 010023 taught by Professor Mrraggillpol during the Fall '09 term at Paris Tech.

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Macro1_PS5_take_home_exam - Macroeconomics 1. Master APE....

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