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Optimal Policies in the Dasgupta—Heal—Solow—Stiglitz Model under Nonconstant Returns to Scale

  • Sergey M. AseevEmail author
  • Konstantin O. BesovEmail author
  • Serguei Yu. KaniovskiEmail author
Article
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Abstract

The paper offers a complete mathematically rigorous analysis of the welfare-maximizing capital investment and resource depletion policies in the Dasgupta—Heal—Solow—Stiglitz model with capital depreciation and any returns to scale. We establish a general existence result and show that an optimal admissible policy may not exist if the output elasticity of the resource equals one. We characterize the optimal policies by applying an appropriate version of the Pontryagin maximum principle for infinite-horizon optimal control problems. We also discuss general methodological pitfalls arising in infinite-horizon optimal control problems for economic growth models, which are not paid due attention in the economic literature so that the results presented there often seem not to be rigorously justified. We finish the paper with an economic interpretation and a discussion of the welfare-maximizing policies.

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Copyright information

© Pleiades Publishing, Ltd. 2019

Authors and Affiliations

  1. 1.Steklov Mathematical Institute of Russian Academy of SciencesMoscowRussia
  2. 2.International Institute for Applied Systems Analysis (IIASA), Schlossplatz 1LaxenburgAustria
  3. 3.Austrian Institute of Economic Research (WIFO)ViennaAustria

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