Paper accepted
Published:
My paper “Asymptotic Linearity of Consumption Functions and Computational Efficiency” with Qingyin Ma got accepted at Journal of Mathematical Economics. The main result is that when the marginal utility function is regularly varying (behave like a power function), the consumption function in optimal savings problem becomes asymptotically linear and we characterize the asymptotic slopes. Initially this paper was part of a bigger project with Ma & Toda (2021), but we split the paper in two to keep them focused and at manageable lengths. The JET paper treats only the case with CRRA (constant relative risk aversion) utility but has an economic application. The JME paper assumes regular variation plus some technical condition and discusses computational efficiency.