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Capital Accumulation in a Model of Growth and Creative Destruction

Discussion Paper 139 | Published October 1, 2001

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Author

Klaus Walde

Capital Accumulation in a Model of Growth and Creative Destruction

Abstract

Capital accumulation and creative destruction is modeled together with risk-averse households. The novel aspect—risk-averse households—allows to use well-known models not only for analyzing long-run growth as in the literature but also short-run fluctuations. The model remains analytically tractable due to a very convenient property of the household’s investment decision in this stochastic continuous-time setup.