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Recursive Utility and Turnpike Theory for GMM Thompson Aggregators

Robert Becker and Juan Pablo Rincón-Zapatero ()

No 2020-001, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: The existence of a unique optimum, a unique optimal stationary program, and a turnpike theorem are demonstrated for a neoclassical one sector optimal growth model. The plannerís allocation problem is formulated as a discrete time deterministic, infinite horizon programming model. The production sector is subject to diminishing marginal returns to capital. The plannerís objective function is derived from a Generalized Marinacci and Montrucchio (GMM) Thompson aggregator preference. A given Thompson aggregator may be associated with many intertemporal utility functions (which may not be ordinally equivalent). The choice of one of these representations over another is shown to be a matter of mathematical tractability. There is an observational equivalence between those alternative objective functions: the qualitative features of the optimal solution do not depend on the particular utility function representation of the underlying Thompson aggregator preference structure.

Keywords: Recursive Utility; Thompson Aggregators; Generalized Marinacci Montrucchio Aggregators; Koopmans Equation; Extremal Fixed Points; Turnpike Theorem; Discounted Golden-Rule; Observational Equivalence Theorem (search for similar items in EconPapers)
JEL-codes: D15 D50 E10 E13 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2020-01
New Economics Papers: this item is included in nep-mac and nep-upt
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