Optimality of a Linear Decision Rule in Discrete Time AK Model

Myungkyu Shim

doi:10.1515/bejte-2021-0061

Optimality of a Linear Decision Rule in Discrete Time AK Model

Myungkyu Shim

Department of Economics

Research output: Contribution to journal › Article › peer-review

Abstract

Surprisingly, formal proof on the optimality of a linear decision rule in the discrete time AK model with a CRRA utility function has not been established in the growth literature while that in the continuous time counterpart is well-established. This note fills such a gap: I provide a formal proof that consumption being linearly related to investment is a sufficient and necessary condition for Pareto optimality in the discrete time AK model.

Original language	English
Pages (from-to)	519-527
Number of pages	9
Journal	B.E. Journal of Theoretical Economics
Volume	23
Issue number	1
DOIs	https://doi.org/10.1515/bejte-2021-0061
Publication status	Published - 2023 Jan 1

Bibliographical note

Publisher Copyright:
© 2021 Walter de Gruyter GmbH, Berlin/Boston.

All Science Journal Classification (ASJC) codes

General Economics,Econometrics and Finance

Access to Document

10.1515/bejte-2021-0061

Cite this

@article{50cd2b45fc5345f7829a3eb8734c3400,

title = "Optimality of a Linear Decision Rule in Discrete Time AK Model",

abstract = "Surprisingly, formal proof on the optimality of a linear decision rule in the discrete time AK model with a CRRA utility function has not been established in the growth literature while that in the continuous time counterpart is well-established. This note fills such a gap: I provide a formal proof that consumption being linearly related to investment is a sufficient and necessary condition for Pareto optimality in the discrete time AK model.",

keywords = "AK model, neo-classical discrete time model, optimality",

author = "Myungkyu Shim",

note = "Publisher Copyright: {\textcopyright} 2021 Walter de Gruyter GmbH, Berlin/Boston.",

year = "2023",

month = jan,

day = "1",

doi = "10.1515/bejte-2021-0061",

language = "English",

volume = "23",

pages = "519--527",

journal = "B.E. Journal of Theoretical Economics",

issn = "1935-1704",

publisher = "Berkeley Electronic Press",

number = "1",

}

TY - JOUR

T1 - Optimality of a Linear Decision Rule in Discrete Time AK Model

AU - Shim, Myungkyu

PY - 2023/1/1

Y1 - 2023/1/1

N2 - Surprisingly, formal proof on the optimality of a linear decision rule in the discrete time AK model with a CRRA utility function has not been established in the growth literature while that in the continuous time counterpart is well-established. This note fills such a gap: I provide a formal proof that consumption being linearly related to investment is a sufficient and necessary condition for Pareto optimality in the discrete time AK model.

AB - Surprisingly, formal proof on the optimality of a linear decision rule in the discrete time AK model with a CRRA utility function has not been established in the growth literature while that in the continuous time counterpart is well-established. This note fills such a gap: I provide a formal proof that consumption being linearly related to investment is a sufficient and necessary condition for Pareto optimality in the discrete time AK model.

KW - AK model

KW - neo-classical discrete time model

KW - optimality

UR - http://www.scopus.com/inward/record.url?scp=85120833770&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85120833770&partnerID=8YFLogxK

U2 - 10.1515/bejte-2021-0061

DO - 10.1515/bejte-2021-0061

M3 - Article

AN - SCOPUS:85120833770

SN - 1935-1704

VL - 23

SP - 519

EP - 527

JO - B.E. Journal of Theoretical Economics

JF - B.E. Journal of Theoretical Economics

IS - 1

ER -

Optimality of a Linear Decision Rule in Discrete Time AK Model

Abstract

Bibliographical note

All Science Journal Classification (ASJC) codes

Access to Document

Other files and links

Fingerprint

Cite this