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One-Sector Nonclassical Optimal Growth: Optimality Conditions and Comparative Dynamics

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  • Amir, Rabah
  • Mirman, Leonard J
  • Perkins, William R

Abstract

The authors consider a one-sector nonclassical model of optimal economic growth, characterized by a convex-concave production function. They provide, in a dynamic-programming context, a characterization of all local (interior) maximum of the miximand of the Bellman equation. These conditions are the Euler equation and a second order condition, namely, that the marginal propensity to consume is less than one. An example is used to illustrate these conditions. Also, several comparative dynamic results are derived. In particular, it is shown that the maximum and minimum selections out of the optimal consumption correspondence shift down as the discount factor increases. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Amir, Rabah & Mirman, Leonard J & Perkins, William R, 1991. "One-Sector Nonclassical Optimal Growth: Optimality Conditions and Comparative Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 625-644, August.
  • Handle: RePEc:ier:iecrev:v:32:y:1991:i:3:p:625-44
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    References listed on IDEAS

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