QUALITATIVE APPLICATION OF A RESULT IN CONTROL THEORY TO PROBLEMS OF ECONOMIC GROWTH.
Abstract
Recent investigations into necessary conditions of optimality for control problems with inequality constraints on the state variables have shown that, for a specific class of problems, the optimal trajectory does not stay on the constraint boundary for non-zero intervals of time. This result permits, a priori, some insight into the structure of the optimal solution. For certain problems in growth economics, this result is of some significance, as is shown by three examples from two different areas. The first two examples are concerned with the problem of optimal employment; interestingly enough, they indicate that, for the models used, the optimal solution is such that full employment is attained at most instantaneously and is not maintained for non-zero intervals of time. The third example is concerned with the optimal investment and foreign aid policies for an underdeveloped economy. An institutional constraint on the stock of foreign debts may be derived from the 'debt-service' ratio. It appears that, contrary to earlier results obtained from simpler models, this constraint is binding at most instantaneously along the optimal trajectory. (Author)
Document Details
- Document Type
- Technical Report
- Publication Date
- Dec 01, 1969
- Accession Number
- AD0703659
Entities
People
- David H. Jacobson
- James L. Mccabe
- Milind M. Lele
Organizations
- Harvard University