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2 votes

Social Planner vs Representative Household

If we assume that there is a single household (there are some subtleties in how one defines a representative household), then the Pareto optimality is the same as solving the planner's problem. The ...
Michael Greinecker's user avatar
2 votes

Three types of Neutral technological Change

Let us assume the Cobb-Douglas production function: $Y = AK^{\alpha}L^{1-\alpha}$, here A is called total factor productivity (TFP) $Y = K^{\alpha}(AL)^{1-\alpha}$, here A is labor augmenting ...
bruno's user avatar
  • 95
1 vote

Why is economic rent not seen as a market failure?

Market failure is by definition a situation when (Hindriks and Myles Intermediate Public Economics 2nd ed pp 42); ... any of the assumptions underlying the competitive economy fail to be met and as a ...
1muflon1's user avatar
  • 56.7k
0 votes

What would happen if we had decreasing returns to scale in the solow-swan growth model? Would there still be a steady state and perfect competition?

The short answer is no. If you recall the simple intensive form (capital-labor ratio) of the Solow model: $$ y_t = k_t^\alpha, $$ with $0 < \alpha < 1$, you would realize that it exhibits ...
teddi's user avatar
  • 191

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