We revisit the seminal growth model with exhaustible resources, the so called Dasgupta-Heal-Stiglitz-Solow model (DHSS). For this optimal control problem with two state variables, we explicitly characterize the dynamics of all the variables in the model and from all possible initial values of the stocks. We determine the condition under which consumption is initially increasing with time and the condition under which initial investment is positive implying that overshooting of man-made capital occurs. We show that the initial consumption under a utilitarian criterion starts below the maximin rate of consumption if and only if the resource is abunduant enough and that under a utilitarian criterion, it is not necessarily the present generation that benefits most from a windfall of resources.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by McGill University, Department of Economics in its series Departmental Working Papers with number
2008-01.
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.:
Cited by: (explanations, 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.)