Question: Consider the standard neoclassical growth model where there are two types of individuals: capitalists and workers. Capitalists own the initial wealth and do not

Consider the standard neoclassical growth model where there are two types of

Consider the standard neoclassical growth model where there are two types of individuals: capitalists and workers. Capitalists own the initial wealth and do not work. Workers do not save. Technology is the standard neoclassical type. (a) Define a competitive equilibrium. (b) Use the first order conditions of the two different types of individuals in order to construct the appropriate implementability conditions. (c) Set up the Ramsey problem and characterize it. How would the standard optimal fiscal policy analysis change?

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