Direct preferences for wealth, the risk premium puzzle, growth, and policy effectiveness

In this paper, we consider social status, the spirit of capitalism, fiscal policies, and asset pricing in a stochastic model of growth. With specific assumptions on the production technology, preferences, and stochastic shocks, we derive the explicit solutions to the growth rates of consumption and...

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Bibliographic Details
Published in:Journal of economic dynamics & control 2002-02, Vol.26 (2), p.247-270
Main Authors: Gong, Liutang, Zou, Heng-fu
Format: Article
Language:English
Subjects:
Asset pricing
Asset valuation
Capitalism
Economic dynamics
Economic theory
Fiscal policies
Fiscal policy
Growth models
Risk
Risk premiums
Social status
Status
Stochastic growth
Stochastic models
Stochastic processes
Studies
The spirit of capitalism
Welfare
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Summary:In this paper, we consider social status, the spirit of capitalism, fiscal policies, and asset pricing in a stochastic model of growth. With specific assumptions on the production technology, preferences, and stochastic shocks, we derive the explicit solutions to the growth rates of consumption and savings and equilibrium returns on all assets. We further demonstrate how fiscal policies, the spirit of capitalism, and stochastic shocks affect growth, asset pricing, and welfare.
ISSN:0165-1889
1879-1743
DOI:10.1016/S0165-1889(00)00043-9