THE ONE-SECTOR GROWTH-MODEL WITH IDIOSYNCRATIC SHOCKS - STEADY-STATESAND DYNAMICS

This paper investigates the one-sector growth model where agents recei ve idiosyncratic labor endowment shocks and face a borrowing constrain t. It is shown that any steady-state capital stock lies strictly above the steady state in the model without idiosyncratic shocks. In additi on, the capital stock increases monotonically when it is sufficiently far below a steady state, However, near a steady state there can be no n-monotonic economic dynamics.