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Recursive utility and optimal growth with bounded or unbounded returns

Author

Listed:
  • Cuong Le Van

    (CERMSEM - CEntre de Recherche en Mathématiques, Statistique et Économie Mathématique - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Yiannis Vailakis

    (UCL IRES - Institut de recherches économiques et sociales - UCL - Université Catholique de Louvain = Catholic University of Louvain)

Abstract

In this paper, we propose a unifying approach to the study of recursive economic problems. Postulating an aggregator function as the fundamental expression of tastes, we explore conditions under which a utility function can be constructed. We also modify the usual dynamic programming arguments to include this class of models. We show that Bellman's equation still holds, so many results known for the additively separable case can be generalized for this general description of preferences. Our approach is general, allowing for both bounded and unbounded returns. Many recursive economic models studied in the literature are particular cases of our setting.

Suggested Citation

  • Cuong Le Van & Yiannis Vailakis, 2005. "Recursive utility and optimal growth with bounded or unbounded returns," Post-Print halshs-00101201, HAL.
    • Handle: RePEc:hal:journl:halshs-00101201
    DOI: 10.1016/j.jet.2004.06.007
    as

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