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On choice of technique in the Robinson–Solow–Srinivasan model
Author(s) -
Ali Khan M.,
Mitra Tapan
Publication year - 2005
Publication title -
international journal of economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 11
eISSN - 1742-7363
pISSN - 1742-7355
DOI - 10.1111/j.1742-7363.2005.00007.x
Subject(s) - economics , mathematical economics , resource allocation , general equilibrium theory , microeconomics , market economy
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.