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Optimal Growth with Scale Economies in Overhead Capital

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  • Martin L. Weitzman

Abstract

Summary: Following closely the approach to optimal economic growth taken in the work of Frank Ramsey (1928), a highly simplified two-sector model is presented in which the "overhead capital" sector exhibits increasing returns to scale. Basic properties of the optimal growth path are discussed and the optimal policy is explicitly demonstrated for a special case. From an economic standpoint, the model might be relevant in bearing on some issues of development programming. Mathematically, this kind of a model has an interesting structure because it is a combination of convex and concave sub-problems.

Suggested Citation

  • Martin L. Weitzman, 1969. "Optimal Growth with Scale Economies in Overhead Capital," Cowles Foundation Discussion Papers 273, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:273
    Note: CFP 334.
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    References listed on IDEAS

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    1. Frederick T. Moore, 1959. "Economies of Scale: Some Statistical Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 73(2), pages 232-245.
    2. D. McFadden, 1967. "The Evaluation of Development Programmes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(1), pages 25-50.
    3. John Haldi & David Whitcomb, 1967. "Economies of Scale in Industrial Plants," Journal of Political Economy, University of Chicago Press, vol. 75, pages 373-373.
    4. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    5. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
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