A local analysis of stability and regularity of stationary states in discrete symmetric optimal capital accumulation models

DOI10.1016/0022-0531(85)90108-5MaRDI QIDQ1069842zbMATH OpenOpenAlexFDO

Authors Swapan Dasgupta

Publication date 1985

Published in Journal of Economic Theory (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/0022-0531(85)90108-5

zbMATH Keywords

discrete timelocal stability of stationary statesoptimal path of capital accumulationsymmetric variational problems

Mathematics Subject Classification ID

Economic growth models (91B62)

Review text

The paper examines the local stability of stationary states towards which the optimal path of capital accumulation asymptotically converges. The analysis is for the special case where the second order cross partial derivatives of the utility function are symmetric, in which case necessary and sufficient conditions for local stability can be provided in terms of characteristic roots of certain submatrices of the Hessian of the utility function. The author extends previous works of Magill and Scheinkman (1979) and Scheinkman (1978) who treated symmetric variational problems in continuous time models by analyzing these problems in discrete time models. In an important theorem (4.1) the author shows that stability implies that the comparative static matrix is negative definite. This, in turn, implies that the stationary state is regular, i.e., the value of the stationary state capital stocks increases with the discount factor.

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Cited in

(7)

• Lipschitz continuous policy functions for strongly concave optimization problems
• Capital deepening and impatience equivalence in stochastic aggregative growth models
• On the local stability of the stationary solution to variational problems
• Saddle-point dynamics in non-autonomous models of multisector growth with variable returns to scale
• On the smoothness of optimal paths
• Endogenous cycles in discrete symmetric multisector optimal growth models
• A note on comparative statics and dynamics of stationary states

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