The miniature two-sector model of optimal growth: The neglected case of a capital-intensive investment-good sector

Minako Fujio, Yan Lei, Liuchun Deng and M. Khan

Journal of Economic Behavior & Organization, 2021, vol. 186, issue C, 662-671

Abstract: This paper considers the neglected case of a capital-intensive investment-good sector in the two-sector Robinson-Shinkai-Leontief (RSL) model of discrete-time optimal economic growth. We find the optimal policy to be surprisingly simple and uniform between the discounted and undiscounted cases. The “straight-down-the-turnpike” policy, first identified by Winter and Shell, entails unemployment or excess supply of capital throughout the optimal transition dynamics. We extend our analysis to the case of circulating capital and find the optimal policy to have the same property. We also briefly indicate possibilities for application to topical concerns.

Keywords: Two-sector optimal growth; Capital-intensive investment-good sector; RSL model; Srinivsan-Uzawa model; Straight-down-the-turnpike theorem (search for similar items in EconPapers)
JEL-codes: C60 D90 O21 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:186:y:2021:i:c:p:662-671

DOI: 10.1016/j.jebo.2020.11.007

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