Optimal Growth: Continuous Time Analysis

Alfonso Novales, Esther Fernández and Jesus Ruiz

Chapter 3 in Economic Growth, 2022, pp 111-167 from Springer

Abstract: Abstract We present the continuous time Cass–Koopmans model, characterizing the rate of capital accumulation that maximizes some social welfare criterion. Thus, we no longer consider a constant savings rate. We show the existence and stability of a unique optimal path. We discuss some numerical exercises on the long-run effects of changes in structural parameters, paying attention to the relevance of the different structural characteristics of the economy in characterizing the transition path between steady-states. The chapter closes with an economy with government. We examine the potential inefficiency of its competitive equilibrium with government, showing that the Ricardian doctrine, on the irrelevance of the financing tools used by the government, may not hold under some types of distortionary taxation.

Keywords: Marginal utility; Physical capital; Competitive equilibrium; Transversality condition; Golden rule (search for similar items in EconPapers)
Date: 2022
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Chapter: Optimal Growth: Continuous Time Analysis (2014)
Chapter: Optimal Growth. Continuous Time Analysis (2009)
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DOI: 10.1007/978-3-662-63982-5_3

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