The invariance principle and income-wealth conservation laws. Application of Lie groups and related transformations (Q1069419)

The purpose of this paper is to uncover ''hidden'' conservation laws in the models with heterogeneous capital goods. The first conservation law uncovered is a pseudo-net-productivity relation which implies that the rate of change in national income is equal to the discount rate multiplied by the utility-value-of-investment. Secondly, the ''modified income'' conservation law is confirmed when the economy possesses taste change and/or technical change. From an empirical perspective, knowledge of conservation laws can assist in the econometric testing of optimal growth models. In addition to the capital-labor ratio and saving ratio the empirical validity of the models can be tested by the appropriate income-wealth ratios.