Uzawa's Transformation and Optimal Control Problems with Variable Rates of Time Preference

Johanna Francis and Tom Kompas

International and Development Economics Working Papers from International and Development Economics

Abstract: Uzawa (1968) first introduced a simple and appealing method for reducing problems with variable rates of time preference to single-state systems by transforming the time scale from t to ., a utility discount factor. This transformation has been used extensively, particularly in models of international trade and finance (e.g., Obstfeld, 1981a, 1981b, 1982, Engeland Kletzer, 1989, and Turnovsky, 1997), where the use of a variable rate of time preference avoids some of the ¡°disturbing implications¡± drawn from typical open-economy Ramsey models. The purpose of this paper, however, is to show that Uzawa¡¯s transformation is valid only when the underlying system to be analyzed is autonomous. Unfortunately, except for the simplest control problems, this is rarely the case. In particular, systems with non-autonomous transition equations imply that the correspondence between .and t is no longer unique, and thus Uzawa¡¯s transformation is not applicable.

JEL-codes: C61 D91 F30 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://crawford.anu.edu.au/degrees/idec/working_papers/IDEC01-12.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: Uzawa's Transformation and Optimal Control Problems With Variable Rates of Time Preference (1998)
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:idc:wpaper:idec01-12

Access Statistics for this paper

More papers in International and Development Economics Working Papers from International and Development Economics Contact information at EDIRC.
Bibliographic data for series maintained by Tom Kompas ( this e-mail address is bad, please contact ).