Optimal Growth with Increasing Returns to Scale in Expanding Capacity

John Hartwick

Working Paper from Economics Department, Queen's University

Abstract: Accumulated savings generates capacity with increasing returns to scale in a one commodity model of optimal growth with circulating capital or capacity. Output is proportional to available capacity. Increasing returns makes a spacing of times for investment optimal in a growing economy. We derive: 1) an optimal investment timing rule; 2) an optimal savings rule, and investigate optimal programs in a model with iso-elastic functional forms. Closed form solutions are computed. The is unstable around the balanced or proportional growth path.

Pages: 32
Date: 1977
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:260

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