On choice of technique in the Robinson–Solow–Srinivasan model |
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Authors: | M Ali Khan Tapan Mitra |
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Institution: | Department of Economics, The Johns Hopkins University, Baltimore, Maryland, USA. Email: .;;Department of Economics, Cornell University, Ithaca, New York, USA. |
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Abstract: | We report results on the optimal "choice of technique" in a model originally formulated by Robinson, Solow and Srinivasan. By viewing this model as a specific instance of the general theory of intertemporal resource allocation associated with Brock, Gale and McKenzie, we resolve long-standing conjectures in the form of theorems on the existence and price-support of optimal paths, and on their long-run behavior. We also examine policies, due to Stiglitz, as a cornerstone for a theory of transition dynamics in this model. We present examples to show that: (i) an optimal program can be periodic; (ii) a Stiglitz' program can be bad; and (iii) a Stiglitz production program can be non-optimal. We then provide sufficient conditions under which the policies proposed by Stiglitz coincide with optimal behavior. |
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Keywords: | choice of technique long run transition dynamics Stiglitz program cycling |
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