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Stochastic Optimal Growth when the Discount Rate Vanishes

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Author Info
Kazuo Nishimura
John Stachurski

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Abstract

It has been shown that long-run optimality of the limit of discounted optima when the discount rate vanishes is implied by a condition on the value function of the optimal program. We suggest a new method to verify this condition in the context of one-sector optimal growth. The idea should be more widely applicable.

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File URL: http://www.economics.unimelb.edu.au/SITE/research/workingpapers/wp04/908.pdf
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Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 908.

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Length: 15 pages
Date of creation: 2004
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Handle: RePEc:mlb:wpaper:908

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  1. Mirman, Leonard J. & Zilcha, Itzhak, 1975. "On optimal growth under uncertainty," Journal of Economic Theory, Elsevier, vol. 11(3), pages 329-339, December. [Downloadable!] (restricted)
  2. Dutta, P.K., 1991. "What Do Discounted Optima Converge To? A Theory of Discount Rate Asymptotics in Economic Models," RCER Working Papers 264, University of Rochester - Center for Economic Research (RCER).
  3. Danthine, Jean-Pierre & Donaldson, John B, 1981. "Stochastic Properties of Fast vs. Slow Growing Economies," Econometrica, Econometric Society, vol. 49(4), pages 1007-33, June. [Downloadable!] (restricted)
  4. Dutta, Prajit K., 1991. "What do discounted optima converge to?: A theory of discount rate asymptotics in economic models," Journal of Economic Theory, Elsevier, vol. 55(1), pages 64-94, October. [Downloadable!] (restricted)
  5. Nishimura, Kazuo & Stachurski, John, 2005. "Stability of stochastic optimal growth models: a new approach," Journal of Economic Theory, Elsevier, vol. 122(1), pages 100-118, May. [Downloadable!] (restricted)
  6. Brock, William A. & Mirman, Leonard J., 1972. "Optimal economic growth and uncertainty: The discounted case," Journal of Economic Theory, Elsevier, vol. 4(3), pages 479-513, June. [Downloadable!] (restricted)
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