Optimality of a Linear Decision Rule in Discrete Time AK Model

Myungkyu Shim

The B.E. Journal of Theoretical Economics, 2023, vol. 23, issue 1, 519-527

Abstract: Surprisingly, formal proof on the optimality of a linear decision rule in the discrete time AK model with a CRRA utility function has not been established in the growth literature while that in the continuous time counterpart is well-established. This note fills such a gap: I provide a formal proof that consumption being linearly related to investment is a sufficient and necessary condition for Pareto optimality in the discrete time AK model.

Keywords: AK model; neo-classical discrete time model; optimality (search for similar items in EconPapers)
JEL-codes: E13 O41 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/bejte-2021-0061

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