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Periodic and Chaotic Programs of Optimal Intertemporal Allocation in an Aggregative Model with Wealth Effects

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  • Majumdar, Mukul
  • Mitra, Tapan

Abstract

We examine a discrete-time aggregative model of discounted dynamic optimization where the felicity function depends on both consumption and capital stock. The need for studying such models has been stressed in the theory of optimal growth and also in the economics of natural resources. We identify conditions under which the optimal program is monotone. In our framework, the optimal program can exhibit cyclic behavior for all discount factors close to one. We also present an example to show that our model can exhibit optimal behavior which is chaotic in both topological and ergodic senses.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 4 (1994)
Issue (Month): 5 (August)
Pages: 649-76

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Handle: RePEc:spr:joecth:v:4:y:1994:i:5:p:649-76

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Cited by:
  1. Partha Dasgupta, 2009. "The Welfare Economic Theory of Green National Accounts," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 42(1), pages 3-38, January.
  2. Katrin Erdlenbruch & Alain Jean-Marie & Michel Moreaux & Mabel Tidball, 2010. "Optimality of Impulse Harvesting Policies," Working Papers hal-00864187, HAL.
  3. Lars Olson & Santanu Roy, 2008. "Controlling a biological invasion: a non-classical dynamic economic model," Economic Theory, Springer, vol. 36(3), pages 453-469, September.
  4. de Hek, Paul A., 1998. "An aggregative model of capital accumulation with leisure-dependent utility," Journal of Economic Dynamics and Control, Elsevier, vol. 23(2), pages 255-276, September.
  5. Anjan Mukherji, 2003. "Competitive Equilibria: Convergence, Cycles or Chaos," ISER Discussion Paper 0591, Institute of Social and Economic Research, Osaka University.
  6. Ali Khan, M. & Piazza, Adriana, 2011. "Optimal cyclicity and chaos in the 2-sector RSS model: An anything-goes construction," Journal of Economic Behavior & Organization, Elsevier, vol. 80(3), pages 397-417.
  7. Mitra, Tapan & Nishimura, Kazuo, 2001. "Discounting and Long-Run Behavior: Global Bifurcation Analysis of a Family of Dynamical Systems," Journal of Economic Theory, Elsevier, vol. 96(1-2), pages 256-293, January.
  8. Richard M. H. Suen, 2012. "Time Preference and the Distribution of Wealth and Income," Working papers 2012-01, University of Connecticut, Department of Economics.
  9. Araújo, Aloísio Pessoa de & Maldonado, Wilfredo L., 2001. "A Note on Learning Chaotic Sunspot Equilibrium," Economics Working Papers (Ensaios Economicos da EPGE) 423, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  10. Joshi, Sumit, 2003. "The stochastic turnpike property without uniformity in convex aggregate growth models," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1289-1315, May.
  11. Olson, Lars J. & Roy, Santanu, 2000. "Dynamic Efficiency of Conservation of Renewable Resources under Uncertainty," Journal of Economic Theory, Elsevier, vol. 95(2), pages 186-214, December.
  12. Horan, Richard D. & Bulte, Erwin H., 2001. "Resource Or Nuisance? Managing African Elephants As A Multi-Use Species," 2001 Annual meeting, August 5-8, Chicago, IL 20440, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  13. Kopel, M. & Dawid, H. & Feichtinger, G., 1998. "Periodic and chaotic programs of intertemporal optimization models with non-concave net benefit function," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 435-447, January.
  14. M. Ali Khan & Adriana Piazzaz, 2009. "Classical Turnpike Theory and the Economics of Forestry," Discussion Papers Series 397, School of Economics, University of Queensland, Australia.

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