Takashi Kamihigashi (Research Institute for Economics and Business Administration, Kobe University) Santanu Roy (Department of Economics, Southern Methodist University)
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This paper studies a one-sector optimal growth model with linear utility in which the production function is generally nonconvex, nondifferentiable, and discontinuous. The model also allows for a general form of irreversible investment. We show that every optimal path either converges to zero or reaches a positive steady state in finite time (and possibly jumps among different steady states afterwards). We establish conditions for extinction (convergence to zero), survival (boundedness away from zero), and the existence of a minimum safe standard of conservation. They extend the conditions known for the case of S-shaped production functions to a much large class of technologies. We also show that as the discount factor approaches one, optimal paths converge to a small neighborhood of the golden rule capital stock.
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Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number
161.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Spence, A Michael & Starrett, David, 1975.
"Most Rapid Approach Paths in Accumulation Problems,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 388-403, June.
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