Optimal resource allocation in a representative investor economy

Abstract

The Ramsey-Cass-Koopmans neoclassical growth setup and the AK endogenous growth framework are two prototypes of a class of growth models where, by assumption, investment resources are always perfectly allocated to production. As a corollary, these models offer a partial view of the growth process circumscribed to a limit case, namely the most favorable case in which all possible frictions on the allocation of investment resources are absent. This paper adds to the conventional growth setup an optimal mechanism of assignment of investment resources that contemplates the possibility of inefficient allocation. In the assumed economy there is a single representative investor and a large number of firms that compete for the available resources. The new setup highlights how agency costs may deviate the economy from the benchmark growth outcome, potentially generating less desirable long-run results. The appeal of the proposed framework resides also on the fact that new determinants of growth emerge and take a leading role, namely the investor's sentiment and the quality of the firms' investment proposals.

Job-Field Underemployment and Career Satisfaction: A Relationship of Cause and Effect

“…One of the implications of this phenomenon on the economy in the macro level is the formation of surpluses in the supply of resources (and of the human capital resource in particular) in certain fields, at the expense of a shortage in the supply of skilled productive elements in others. Such a business environment in the economy may negatively influence growth (Gomes, 2015) and indirectly -low work productivity rates, as well. (Eckstein, Lifschitz & Trilnick, 2016).…”