Solving optimal growth models with vintage capital: The dynamic programming approach. (English) Zbl 1151.91069
Summary: This paper deals with an endogenous growth model with vintage capital and, more precisely, with the AK model proposed by R. Boucekkine, O. Licandro, L.A. Puch and F. del Rio [J. Econ. Theory 120, No. 1, 39–72 (2005; Zbl 1120.91024)]. In endogenous growth models the introduction of vintage capital allows to explain some growth facts but strongly increases the mathematical difficulties. So far, in this approach, the model is studied by the Maximum Principle; here we develop the Dynamic Programming approach to the same problem by obtaining sharper results and we provide more insight about the economic implications of the model. We explicitly find the value function, the closed loop formula that relates capital and investment, the optimal consumption paths and the long run equilibrium. The short run fluctuations of capital and investment and the relations with the standard AK model are analyzed. Finally the applicability to other models is also discussed.
MSC:
| 91B62 | Economic growth models |
| 49L20 | Dynamic programming in optimal control and differential games |
| 49K25 | Optimal control problems with equations with ret.arguments (nec.) (MSC2000) |
| 34K35 | Control problems for functional-differential equations |
Citations:
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