Econometrica: Nov 1972, Volume 40, Issue 6

An Optimal Growth Model with Time Lags<1137:AOGMWT>2.0.CO;2-O
p. 1137-1146

Andrew Whinston, Edna Loehman, Mohamed A. El-Hodiri

The paper discusses the allocation of output among consumption and two types of capital with different gestation periods. Along an optimal path we show that the imputed prices of capital goods, from the time they start production, do not exceed the prices of output, which are not less than the marginal instantaneous utility of consumption. A simple numerical example helps to illustrate some further implications of the model.

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