Undiscounted optimal growth in a Leontief two-sector model with circulating capital: The case of a capital-intensive consumption good

Minako Fujio

Journal of Economic Behavior & Organization, 2008, vol. 66, issue 2, 420-436

Abstract: This essay presents a complete characterization of undiscounted optimal policy in a Leontief two-sector growth model. We work with the precise technological specification used in Nishimura and Yano [Nishimura, K., Yano, M., 1995. Non-linear dynamics and chaos in optimal growth: an example. Econometrica 63, 981-1001; Nishimura, K., Yano, M., 1996. Chaotic solutions in dynamic linear programming. Chaos Solitons & Fractals 7, 1941-1953; Nishimura, K., Yano, M., 2000. Non-linear dynamics and chaos in optimal growth: a constructive exposition. In: Majumdar, M., Mitra, T. (Eds.), Optimization and Chaos. Springer-Verlag, Berlin, pp. 258-295] and employ a geometric method developed by Khan and Mitra [Khan, M.A., Mitra. T., in press. Optimal growth in a two-sector model without discounting: a geometric investigation. Japanese Economic Review]. Our analysis uncovers rich transition dynamics. Monotonic convergence emerges only under a non-negligible set of parameters with two special features; impossibility of full utilization of factors and convergence in a finite number of periods. Moving beyond this special case, full utilization is not always optimal even if it is feasible. Furthermore, with 'large enough' capital stock the optimal policy becomes a constant.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167-2681(06)00255-1
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:66:y:2008:i:2:p:420-436

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().