Grandma'S dress, or what'S new for optimal growth
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Rolf Mantel [1]
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[1] Universidad de San Andrés
Universidad de San Andrés
Argentina
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- Localización: Revista de análisis económico, ISSN-e 0718-8870, ISSN 0716-5927, Vol. 8, Nº 1 (Editor Invitado: William Easterly), 1993, págs. 61-81
- Idioma: inglés
- Enlaces
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Resumen
The recent revival of interest in oprimal growth theory justifies the analysis of more flexible descriptions of preferences over time and their implications for oprimal growth, in constrat with some of the newer investigations which attribute differing growth paths to tecnological factors. For the case of discrete time, using welfare functions for which the rate of time preference is variable. Beals and Koopmans showed in 1969 that the long run optimal capital path may depend on initial wealth, so that not all of the conclusions of optimal growth theory with a constant rare of time preference hold. Equivalent results for the case of continuous time have been reached by the present author. The analysis by the author of a particular case in which the resulting wefare function can be explicity represented as an integral, illustrates the qualitative behavior of optimal growth paths. A more thorough analysis shows that a suitable limiting procesal lows one to define a utility function for continuous time with a variable rate of time preference which cannot be represented in closed form. The present investigation applies such preferences lo optimal with results similar to those obtained for the dscrete time case. In particular -when the rate of time preference is allowed to vary- a country may decide not to undertake the effort of economic development when its initial capital endowment is below some critical level. It is impossible to obtain such a result with a constant rate of time preference in the case of a simple neoclassical technology.
