Economic Theory

, Volume 4, Issue 5, pp 791–797 | Cite as

Stochastic growth when utility depends on both consumption and the stock level

  • Yaw Nyarko
  • Lars J. Olson
Research Articles


This paper examines the dynamic behavior of optimal consumption and investment policies in the aggregate stochastic growth model when utility depends on both consumption and the stock level. Such models arise in the study of renewable resources, monetary growth, and growth with public capital. The paper shows that there is a global convergence of optimal policies to a unique stationary distribution if (a) there is sufficient complementarity in the model, or (b) if there is sufficient randomness in production. Two examples illustrate the possibility of multiple stationary distributions. In one, multiple stochastic steady states exist for a generic class of production and utility functions.


Steady State Utility Function Dynamic Behavior Economic Theory Growth Model 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer-Verlag 1994

Authors and Affiliations

  • Yaw Nyarko
    • 1
  • Lars J. Olson
    • 2
  1. 1.Department of EconomicsNew York UniversityNew YorkUSA
  2. 2.Department of Agricultural and Resource EconomicsUniversity of MarylandCollege ParkUSA

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