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Ergodic chaos in optimal growth models with low discount rates

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Summary

We show that for every discount factorρε(0,1) one can find infinitely many strictly concave discrete-time optimal growth models in reduced form which have optimal policy functions exhibiting ergodic chaos. These reduced form models are interpreted in a two-sector optimal growth setting with utility functions depending on consumption as well as on capital.

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Authors and Affiliations

  1. Institute of Economic Research, Kyoto University, 606, Kyoto, Japan

    Kazuo Nishimura

  2. Department of Economics, University of Vienna, A-1010, Vienna, Austria

    Gerhard Sorger

  3. Faculty of Economics, Yokohama National University, 240, Yokohama, Japan

    Makoto Yano

Authors
  1. Kazuo Nishimura
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  2. Gerhard Sorger
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  3. Makoto Yano
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Additional information

We thank Luigi Montrucchio for pointing out an error in a previous version of the paper.

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Nishimura, K., Sorger, G. & Yano, M. Ergodic chaos in optimal growth models with low discount rates. Econ Theory 4, 705–717 (1994). https://doi.org/10.1007/BF01212026

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  • DOI: https://doi.org/10.1007/BF01212026

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