This paper makes use of optimal control relaxed problems to prove the absence of optimal trajectory in continuous time models with social increasing returns to scale where indeterminacy occurs. Although an efficient optimal policy does not exist, some chattering stabilization policies can mimic trajectories whose criterion functional approximates the supremum of the relaxed problem. This configuration is closely related to indeterminacy: by contrast, when the steady state is determined, an optimal policy is likely to exist.
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Paper provided by European University Institute in its series Economics Working Papers with number
ECO2008/01.
Length: Date of creation: 2009 Date of revision: Handle: RePEc:eui:euiwps:eco2009/01
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Find related papers by JEL classification: C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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Seierstad, Atle & Sydsaeter, Knut, 1977.
"Sufficient Conditions in Optimal Control Theory,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 367-91, June.
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