On the level of optimal capital import in a decentralized competitive economy

In a competitive economy, capital import will affect the distribution of income among domestic economic units. Our main aim is to determine the optimal level of capital import, given that the distribution of income among people is accounted for. In order to consider explicitly the effect of capital import on saving behavior, we shall adopt a simple, two-period life cycle growth model. It will be shown that in order to know if the government can increase everybody's long-run utility, the criterion of the golden rule is important.