Maximin paths of heterogeneous capital accumulation and the instability of paradoxical steady states
Abstract
If there exist heterogeneous capital goods, a steady state may be "paradoxical" in
the sense that increasing the rate of interest above the Golden Rule level may lead
to an increase in consumption or utility, rather than to the decrease which always
occurs in one-sector models. It is shown that, in many cases, a path of capital accumulation
which maximizes the minimum consumption or utility level is unlikely to converge to
a paradoxi- cal steady state of this kind.
Type
Journal articleSubject
Solow-Swan ModelPermalink
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Edwin Burmeister
Research Professor Emeritus of Economics

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