| has gloss | eng: The Ramsey growth model is a neo-classical model of economic growth based primarily on the work of the economist and mathematician Frank P. Ramsey. The Ramsey model differs from the Solow model in one crucial respect: it explicitly models the consumer side and endogenizes saving. As a result, unlike the Solow model, the saving rate in general is not constant and the convergence of the economy to its steady state is not uniform. Another implication of the endogenous saving rate is that the outcome in the Ramsey model is Pareto optimal. The fact that the outcome is Pareto optimal is not just an implication of the endogenous savings rate; Pareto optimality also requires conditions of the first welfare theorem to hold (contrast this for example with Samuelsons OLG model with endogenous savings where outcomes may be dynamically inefficient). Originally Ramsey set out the model as a central planners problem of maximizing levels of consumption over successive generations. Only later was a model adopted by subsequent researchers as a description of a decentralized dynamic economy. |
