The Two Sector Ramsey Model

  • Terry L. RoeEmail author
  • D. Şirin Saracoğlu
  • Rodney B.W. Smith


This chapter presents the two-sector neoclassical growth model where the transition path of consumption and saving is determined by households optimizing over time, and where firms interact in a competitive market environment. The single sector version of this model can be traced to Ramsey(1928), and its refinements by Cass (1965) and Koopmans (1965). King and Rebelo (1993) study, numerically, the transitional dynamics of the model which they confront to several stylized factors of economic growth. Barro and Sala-i-Martin (2004) also provide a full treatment of the single sector model.


Service Sector Wage Rate Capital Stock Supply Function Transition Path 
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Copyright information

© Springer-Verlag New York 2010

Authors and Affiliations

  • Terry L. Roe
    • 1
    Email author
  • D. Şirin Saracoğlu
    • 2
  • Rodney B.W. Smith
    • 1
  1. 1.Department of Applied EconomicsUniversity of MinnesotaSt. PaulUSA
  2. 2.Department of EconomicsMiddle East Technical University (METU)AnkaraTurkey

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