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Monotonicity and Continuity of the Critical Capital Stock in the Dechert-Nishimura Model

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  • Ken-Ichi Akao

    (School of Social Sciences, Waseda University, Japan)

  • Takashi Kamihigashi

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

  • Kazuo Nishimura

    (KIER, Kyoto University, Japan)

Abstract

We show that the critical capital stock of the Dechert-Nishimura (1983) model is a decreasing and continuous function of the discount factor. We also show that the critical capital stock merges with a nonzero steady state as the discount factor decreases to a certain boundary value, and that the critical capital stock converges to the minimum sustainable capital stock as the discount factor increases to another boundary value.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2011-20.pdf
File Function: Revised version, 2011
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Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number DP2011-20.

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Length: 19 pages
Date of creation: Apr 2011
Date of revision: Sep 2011
Handle: RePEc:kob:dpaper:dp2011-20

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Keywords: Dechert-Nishimura model; Nonconvexity; Optimal growth; critical capital stock;

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References

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  1. Mukul Majumdar & Manfred Nermuth, 1982. "Dynamic Optimization in Non-Convex Models with Irreversible Investment: Monotonicity and Turnpike Results (Now published in Zeitschrift für National-Ökonomie (Journal of National Economics), vol.42,," STICERD - Theoretical Economics Paper Series 40, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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Cited by:
  1. Cuong Le Van & Cagri Saglam & Agah Turan, 2014. "Optimal Growth Strategy Under Dynamic Threshold," Working Papers 2014-123, Department of Research, Ipag Business School.

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