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A model of optimal growth strategy

  • Askenazy, Philippe
  • Le Van

In this paper we present an optimal growth model with convex-concave technology, for an open developing country. The latter may choose to produce consumption goods by borrowing on capital markets. We prove there exists two non trivial steady states. An optimal path converges either to 0 or to the high stedy-state. That depends on the levels of the initial debt and/or of the debt constraint. We prove also there exists a poverty trap if the time preference is very high.

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Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Couverture Orange) with number 9707.

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Length: 30 pages
Date of creation: 1997
Date of revision:
Handle: RePEc:cpm:cepmap:9707
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  1. van de Klundert, T.C.M.J. & Smulders, J.A., 1994. "North-South knowledge spillovers and competition : Convergence versus divergence," Discussion Paper 1994-70, Tilburg University, Center for Economic Research.
  2. Robert J. Barro & N. Gregory Mankiw & Xavier Sala-i-Martin, 1994. "Capital mobility in Neoclassical models of growth," Economics Working Papers 82, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Askenazy, P. & Le Van, C., 1997. "A Model of Optimal Growth Strategy," DELTA Working Papers 97-27, DELTA (Ecole normale supérieure).
  4. Costas Azariadis, 1996. "The Economics of Poverty Traps Part One: Complete Markets," Working Papers 9606, Centro de Investigacion Economica, ITAM.
  5. Dechert, W. Davis & Nishimura, Kazuo, 1983. "A complete characterization of optimal growth paths in an aggregated model with a non-concave production function," Journal of Economic Theory, Elsevier, vol. 31(2), pages 332-354, December.
  6. repec:oup:qjecon:v:105:y:1990:i:2:p:501-26 is not listed on IDEAS
  7. repec:oup:qjecon:v:110:y:1995:i:3:p:641-80 is not listed on IDEAS
  8. Daniel Cohen & Jeffrey Sachs, 1991. "Growth and External Debt Under Risk of Debt Repudiation," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 437-472 National Bureau of Economic Research, Inc.
  9. Skiba, A K, 1978. "Optimal Growth with a Convex-Concave Production Function," Econometrica, Econometric Society, vol. 46(3), pages 527-39, May.
  10. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  11. repec:oup:qjecon:v:106:y:1991:i:2:p:369-405 is not listed on IDEAS
  12. repec:oup:qjecon:v:106:y:1991:i:2:p:651-67 is not listed on IDEAS
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