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Zbl 1142.91667
Kamihigashi, Takashi; Roy, Santanu
A nonsmooth, nonconvex model of optimal growth. (English)
[J] J. Econ. Theory 132, No. 1, 435-460 (2007). ISSN 0022-0531

Summary: 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 1, 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 1, any optimal path either grows unboundedly or converges to an arbitrarily large capital stock.

MSC 2000:: *91B62 Dynamic economic models etc.
37N40 Dynamical systems in optimization and economics
49J52 Nonsmooth analysis (other weak concepts of optimality)

Keywords: nonconvex; nonsmooth

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Zentralblatt MATH Berlin [Germany]