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On sustained economic growth with wealth effects

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  • Santanu Roy

Abstract

In a discounted one‐sector convex model of optimal economic growth where utility may depend on both consumption and capital stock, I derive necessary and sufficient conditions for sustained growth (unbounded expansion of capital and consumption). Conditions for bounded growth and extinction are also outlined. Optimal paths may be non‐monotone. Sustained growth may occur even though the asymptotic marginal productivity is less than the discount rate and may require the initial capital stock to be above a critical level. The behavior of the marginal rate of substitution between consumption and capital plays a crucial role in the conditions.

Suggested Citation

  • Santanu Roy, 2010. "On sustained economic growth with wealth effects," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(1), pages 29-45, March.
    • Handle: RePEc:bla:ijethy:v:6:y:2010:i:1:p:29-45
    DOI: 10.1111/j.1742-7363.2009.00120.x
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    References listed on IDEAS

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    Cited by:

    1. Zaifu Yang & Rong Zhang, 2021. "Generalized Cumulative Offer Processes," Discussion Papers 21/08, Department of Economics, University of York.
    2. Ha-Huy, Thai & Tran, Nhat Thien, 2020. "A simple characterisation for sustained growth," Journal of Mathematical Economics, Elsevier, vol. 91(C), pages 141-147.
    3. Ha-Huy, Thai & Tran, Nhat-Thien, 2019. "A simple characterization for sustained growth," MPRA Paper 94576, University Library of Munich, Germany.
    4. Zaifu Yang & Rong Zhang, 2024. "Consumption, Wealth, Frugality, and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 25(1), pages 31-61, May.

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