A Model of Optimal Growth Strategy
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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|Date of creation:||1997|
|Date of revision:|
|Publication status:||Published in Journal of Economic Theory, 1999, vol. 85, no. 1, pp. 27-54|
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