@techreport{NBERw8635,
title = "On the Invariance of the Rate of Return to Convex Adjustment Costs",
author = "Andrew B. Abel",
institution = "National Bureau of Economic Research",
type = "Working Paper",
series = "Working Paper Series",
number = "8635",
year = "2001",
month = "December",
doi = {10.3386/w8635},
URL = "http://www.nber.org/papers/w8635",
abstract = {The Modified Golden Rule, which relates the rate of return on capital and the growth rate of the capital stock along long-run growth paths that maximize the utility of a representative infinitely-lived consumer, is invariant to the introduction of convex capital adjustment costs. Therefore, along balanced growth paths in neoclassical optimal growth models with an exogenous long-run growth rate of capital, the rate of return is invariant to the introduction of convex adjustment costs, though the capital-labor ratio is reduced along such paths. In AK models, convex adjustment costs reduce the growth rate and rate of return on capital.},
}