Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: May, 1977, Volume 45, Issue 4

Maximin Paths of Heterogeneous Capital Accumulation and the Instability of Paradoxical Steady States<853:MPOHCA>2.0.CO;2-1
p. 853-870

E. Burmeister, P. J. Hammond

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 paradoxical steady state of this kind.

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