Stochastic shocks in a two-sector Solow model

Authors

Simone Marsiglio, University of WollongongFollow

RIS ID

97959

Publication Details

Marsiglio, S. (2012). Stochastic shocks in a two-sector Solow model. International Journal of Mathematical Modelling and Numerical Optimisation, 3 (4), 313-318.

Abstract

We study a stochastic, discrete-time, two-sector growth model à la Solow (1956) characterised by perpetual growth. Assuming that exogenous i.i.d. shocks hit the physical production sector, we show that the capital dynamics can be converted, through an appropriate log-transformation, into an iterated function system converging to an invariant distribution supported on a Cantor set.