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Modeling The Minimum Time Needed To Economic Maturity


  • Darong Dai

    () (Nanjing University, Nanjing, China)


A general equilibrium model has been constructed in a stochastic endogenous growth economy with the capital-labor ratio driven by an Itô-Lévy diffusion process. In particular, formal definition of the minimum-time needed to economic maturity is identified in the model and closed-form solutions of optimal savings strategy and optimal tax rates are established when the representative agent is assumed to exhibit log preference and there is a benevolent government in the economy. Moreover, the minimum-time needed to economic maturity is explicitly derived in the sense of sub-game perfect Nash equilibrium and one can further proceed to comparative static analysis with respect to the relevant parameters of the underlying economy such as the subject discount factor, the initial level of capital stock per capita, the utility-optimal and sustainable terminal path level of capital stock per capita, the natural growth rate of population, and the exogenous level of government spending. Finally, it is worth emphasizing that we focus on underdeveloped economies such as China and the present exploration presents a baseline mathematical model for studying the optimal policies needed to reach economic maturity as soon as possible.

Suggested Citation

  • Darong Dai, 2013. "Modeling The Minimum Time Needed To Economic Maturity," Economic Research Guardian, Weissberg Publishing, vol. 3(1), pages 2-21, June.
  • Handle: RePEc:wei:journl:v:3:y:2013:i:1:p:2-21

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    References listed on IDEAS

    1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
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    Cited by:

    1. Dai, Darong, 2011. "Wealth Martingale and Neighborhood Turnpike Property in Dynamically Complete Market with Heterogeneous Investors," MPRA Paper 46416, University Library of Munich, Germany.

    More about this item


    Endogenous growth; Minimum-time objective; Ratchet effect; Economic maturity; Economic development;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models


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