Asymptotic Linearity of Consumption Functions and Computational Efficiency

• Tác giả: Qingyin Ma, Alexis Akira Toda
• Ngôn ngữ: eng
• Ký hiệu phân loại: 511.4 Approximations formerly also 513.24 and expansions
• Thông tin xuất bản: 2020
• Bộ sưu tập: Báo, Tạp chí
• ID: 163986

Tóm tắt

We prove that the consumption functions in optimal savings problems are asymptotically linear if the marginal utility is regularly varying. We also analytically characterize the asymptotic marginal propensities to consume (MPCs) out of wealth. Our results are useful for obtaining good initial guesses when numerically computing consumption functions, and provide a theoretical justification for linearly extrapolating consumption functions outside the grid.