Arbeitspapier
On the Phelps-Koopmans theorem
We examine whether the Phelps-Koopmans theorem is valid in models with nonconvex production technologies. We show by example that a nonstationary path that converges to a capital stock above the smallest golden rule may indeed be efficient. This finding has the important implication that capital overaccumulation need not always imply inefficiency. We provide general conditions on the production function under which all paths that have a limit in excess of the smallest golden rule must be efficient, which proves a version of the theorem in the nonconvex case. Finally, we show by example that a nonconvergent path with limiting capital stocks bounded above (and away from) the smallest golden rule can be efficient, even if the model admits a unique golden rule. Thus the Phelps-Koopmans theorem in its general form fails to be valid.
- Language
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Englisch
- Bibliographic citation
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Series: CAE Working Paper ; No. 09-04
- Classification
-
Wirtschaft
Optimization Techniques; Programming Models; Dynamic Analysis
One, Two, and Multisector Growth Models
- Subject
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capital overaccumulation
inefficiency
Phelps-Koopmans theorem
non-convex production set
- Event
-
Geistige Schöpfung
- (who)
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Mitra, Tapan
Ray, Debraj
- Event
-
Veröffentlichung
- (who)
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Cornell University, Center for Analytical Economics (CAE)
- (where)
-
Ithaca, NY
- (when)
-
2009
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Mitra, Tapan
- Ray, Debraj
- Cornell University, Center for Analytical Economics (CAE)
Time of origin
- 2009
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