A nonsmooth, nonconvex model of optimal growth

Takashi Kamihigashi and Santanu Roy

No 173, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper analyzes the nature of economic dynamics in a one-sector optimal growth model in which the technology is generally nonconvex, nondifferentiable, and discontinuous. The model also allows for irreversible investment and unbounded growth. We develop various tools to overcome the technical difficulties posed by the generality of the model. We provide sufficient conditions for optimal paths to be bounded, to converge to zero, to be bounded away from zero, and to grow unboundedly. We also show that under certain conditions, if the discount factor is close to one, any optimal path from a given initial capital stock converges to a small neighborhood of the golden rule capital stock, at which sustainable consumption is maximized. If it is maximized at infinity, then as the discount factor approaches one, any optimal path either grows unboundedly or converges to an arbitrarily large capital stock.

Keywords: Nonconvex, onsmooth, and discontinuous technology; Optimal growth; Unbounded growth; Extinction; Neighborhood turnpike (search for similar items in EconPapers)
JEL-codes: C61 D90 O41 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2005-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp173.pdf First version, 2005 (application/pdf)

Related works:
Journal Article: A nonsmooth, nonconvex model of optimal growth (2007)
Working Paper: A Nonsmooth, Nonconvex Model of Optimal Growth (2003)
Working Paper: A Nonsmooth, Nonconvex Model of Optimal Growth (2003)
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:kob:dpaper:173

Access Statistics for this paper

More papers in Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University 2-1 Rokkodai, Nada, Kobe 657-8501 JAPAN. Contact information at EDIRC.
Bibliographic data for series maintained by Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University ().