OPTIMAL GROWTH IN THE TWO-SECTOR RSL MODEL WITH CAPITAL-INTENSIVE CONSUMPTION GOODS: A DYNAMIC PROGRAMMING APPROACH

We study the two-sector Robinson-Shinkai-Leontief (RSL) model of optimal economic growth with discounting for the case of capital-intensive consumption goods. We identify explicitly a lower bound for the discount factor above which the optimal growth path for any initial stock converges to the modified golden rule stock in finite periods, following the prediction of the undis-counted RSL model. This result echoes the earlier finding in Khan-Mitra [12]. We also provide conditions under which the straight-down-to-the-turnpike policy is optimal.

Duke Scholars

Author Liuchun Deng DKU Faculty