Optimization of Economic Renovation

Natali Hritonenko and Yuri Yatsenko
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Natali Hritonenko: Prairie View A&M University

Chapter Chapter 5 in Mathematical Modeling in Economics, Ecology and the Environment, 2013, pp 105-130 from Springer

Abstract: Abstract This chapter analyzes optimization problems in the economic models with heterogeneous capital and labor of Chap. 4 . Such models are important in explaining economic modernization under improving technology. Section 5.1 provides a qualitative analysis of the continuous-time optimization problem of one-machine replacement from Sect. 4.4 using standard tools of nonlinear optimization. Section 5.2 explores the optimal modernization of vintage capital in a profit-maximizing firm under environmental constraints. Section 5.3 investigates an optimization problem with nonlinear utility in the Ramsey vintage capital model of Sect. 4.2 . A balanced growth regime is established and analyzed under exponential technology and labor. It possesses new properties compared to the linear utility case. Section 5.4 contains a mathematical appendix that derives extremum conditions for vintage capital models using variation techniques and Lagrange multipliers.

Keywords: Optimal Control Problem; Technological Change; Balance Growth; Optimal Lifetime; Capital Price (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spochp:978-1-4614-9311-2_5

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DOI: 10.1007/978-1-4614-9311-2_5

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