Abstract
This paper firstly gives a detailed, modified analytical and graphical description of the allocation process in the one-good Diamond life-cycle growth model. The independence of the optimal growth path and the optimal division of output — making up the Two-Part-Golden rule — is stressed.
Market failure resulting from the additional Modigliani-Diamond capital market conditions is discussed.
Using an endogenous population growth rate, a more comprehensive “modified” Two-Part Golden rule (encompassing Phelps’, Davis’ and Diamonds Golden rule respectively) is derived.
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© 1989 Springer-Verlag Berlin Heidelberg
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Berthold, N., Pflüger, M. (1989). Market Failure, Population Growth and Government Intervention in a Life-Cycle Growth Model. In: Wenig, A., Zimmermann, K.F. (eds) Demographic Change and Economic Development. Studies in Contemporary Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-83789-0_4
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DOI: https://doi.org/10.1007/978-3-642-83789-0_4
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