×

Generically distributed investments on flexible projects and endogenous growth. (English) Zbl 1405.91398

Summary: In this paper we study an endogenous growth model where investments are (generically) distributed over multi-period flexible projects leading to new capital once completed. Recently developed techniques in dynamic programming are adapted and used to unveil the global dynamics of this model. Based on this analytical ground, several numerical exercises are performed to show the quantitative relevance of the analytical findings with an emphasis on the relation between project features and economic growth and speed of convergence toward the balanced growth path.

MSC:

91B62 Economic growth models
90C39 Dynamic programming
49N90 Applications of optimal control and differential games
PDFBibTeX XMLCite
Full Text: DOI

References:

[1] Al-Momani, A.H.: Construction delay: a quantitative analysis. Int. J. Proj. Manag. 18, 51-59 (2000) · doi:10.1016/S0263-7863(98)00060-X
[2] Altug, S.: Time-to-build and aggregate fluctuations: some new evidence. Int. Econ. Rev. 30, 889-920 (1989) · Zbl 0694.62060 · doi:10.2307/2526758
[3] Asea, P.K., Zak, P.J.: Time-to-build and cycles. J. Econ. Dyn. Control 23, 1155-1175 (1999) · Zbl 1016.91068 · doi:10.1016/S0165-1889(98)00052-9
[4] Bambi, M.: Endogenous growth and time to build: the AK case. J. Econ. Dyn. Control 32(4), 1015-1040 (2008) · Zbl 1181.91166 · doi:10.1016/j.jedc.2007.04.002
[5] Bambi, M., Fabbri, G., Gozzi, F.: Optimal policy and consumption smoothing effects in the time-to-build AK model. Econ. Theory 50, 635-669 (2012) · Zbl 1246.91082 · doi:10.1007/s00199-010-0577-3
[6] Bambi, M., Gori, F.: Unifying time-to-build theory. Macroecon. Dyn. 18, 1713-1725 (2014) · doi:10.1017/S1365100513000102
[7] Bambi, M., Gozzi, F., Licandro, O.: Endogenous growth and wave-like business fluctuations. J. Econ. Theory 154, 68-111 (2014) · Zbl 1309.91095 · doi:10.1016/j.jet.2014.08.004
[8] Barro, R., Sala-i Martin, X.: Economic Growth, 2nd edn. MIT Press, Cambridge (2004) · Zbl 0825.90067
[9] Benhabib, J., Rustichini, A.: Vintage capital, investment, and growth. J. Econ. Theory 55, 323-339 (1991) · Zbl 0754.90007 · doi:10.1016/0022-0531(91)90043-4
[10] Boucekkine, R., de la Croix, D., Licandro, O.: Vintage capital growth theory: three breakthroughs. Front. Econ. Growth Dev. 20(1), 14-27 (2011)
[11] Boucekkine, R., Fabbri, G., Gozzi, F.: Maintenance and investment: complements or substitutes? a reappraisal. J. Econ. Dyn. Control 34, 2420-2439 (2010) · Zbl 1200.91206 · doi:10.1016/j.jedc.2010.06.007
[12] Boucekkine, R., Fabbri, G., Pintus, P.: Short-run Pain, Long-run gain: The Conditional Welfare Gains from International Financial Integration the Conditional Welfare Gains from International Financial Integration. AMSE Working Papers 1202 (2015) · Zbl 1400.91323
[13] Boucekkine, R., Germain, M., Licandro, O.: Replacement echoes in the vintage capital growth model. J. Econ. Theory 74, 333-348 (1997) · Zbl 0889.90031 · doi:10.1006/jeth.1996.2265
[14] Boucekkine, R., Licandro, O., Puch, L., del Rio, F.: Vintage capital and the dynamics of the AK model. J. Econ. Theory 120, 39-72 (2005) · Zbl 1120.91024 · doi:10.1016/j.jet.2004.02.006
[15] Brezis, H.: Functional Analysis, Sobolev Spaces and Partial Differential Equations. Universitext, Springer, New York (2011) · Zbl 1220.46002
[16] Christiano, L.J., Todd, R.M.: Time to plan and aggregate fluctuations. Fed. Res. Bank Minneap. Q. Rev. 20, 14-27 (1996)
[17] Del Boca, A., Galeotti, M., Himmelberg, C.P., Rota, P.: Investment and time to plan and build: a comparison of structures vs. equipment in a panel of italian firms. J. Eur. Econ. Assoc. 6, 864-889 (2008) · doi:10.1162/JEEA.2008.6.4.864
[18] d’Albis, H., Augeraud-Veron, E.: Balanced cycles in an olg model with a continuum of finitely-lived individuals. Econ. Theory 30(1), 181-186 (2007) · Zbl 1124.91049 · doi:10.1007/s00199-005-0043-9
[19] Diekmann, O., Van Gils, S.A., Lunel, S.M.V., Walther, H.O.: Delay Equations. Springer, Berlin (1995) · Zbl 0826.34002 · doi:10.1007/978-1-4612-4206-2
[20] Engelborghs, K., Roose, D.: Numerical computation of stability and detection of Hopf bifurcations of steady state solutions of delay differential equations. Adv. Comput. Math. 10(3/4), 271-289 (1999) · Zbl 0929.65054 · doi:10.1023/A:1018986817622
[21] Fabbri, G., Gozzi, F.: Solving optimal growth models with vintage capital: the dynamic programming approach. J. Econ. Theory 143(1), 331-373 (2008) · Zbl 1151.91069 · doi:10.1016/j.jet.2008.03.008
[22] Federico, S., Goldys, B., Gozzi, F.: HJB equations for the optimal control of differential equations with delays and state constraints, i: regularity of viscosity solutions. SIAM J. Control Optim. 48(8), 4821-5653 (2009)
[23] Feichtinger, G., Hartl, R.F., Kort, P.M., Veliov, V.M.: Anticipation effects of technological progress on capital accumulation: a vintage capital approach. J. Econ. Theory 126, 143-164 (2006) · Zbl 1108.91055 · doi:10.1016/j.jet.2004.10.001
[24] Feichtinger, G., Hartl, R.F., Sethi, S.P.: Dynamic optimal control models in advertising: recent developments. Manag. Sci. 40(2), 195-226 (1994) · Zbl 0807.90073 · doi:10.1287/mnsc.40.2.195
[25] Ferrara, M., Guerrini, L., Sodini, M.: Nonlinear dynamics in a Solow model with delay and non-convex technology. Appl. Math. Comput. 228, 1-12 (2014) · Zbl 1364.91097
[26] Flyvbjerg, B., Holm, M.K.S., Buhl, S.L.: How common and how large are cost overruns in transport infrastructure projects? Transp. Rev. 23(1), 71-88 (2003) · doi:10.1080/01441640309904
[27] Flyvbjerg, B., Holm, M.K.S., Buhl, S.L.: Cost underestimation in public works projects: error or lie? J. Am. Plan. Assoc. 68(3), 279-295 (2002) · doi:10.1080/01944360208976273
[28] Freni, G., Gozzi, F., Salvadori, N.: Existence of optimal strategies in linear multisector models. Econ. Theory 29(1), 25-48 (2006) · Zbl 1113.91037 · doi:10.1007/s00199-005-0025-y
[29] Hale, J.K., Lunel, S.M.V.: Introduction to Functional-Differential Equations, Applied Mathematical Sciences, vol. 99. Springer, New York (1993) · Zbl 0787.34002 · doi:10.1007/978-1-4612-4342-7
[30] Hartl, R.F.: Optimal dynamic advertising policies for hereditary processes. J. Optim. Theory Appl. 43(1), 51-72 (1984) · Zbl 0518.90040 · doi:10.1007/BF00934746
[31] Hritonenko, N., Yatsenko, Y.U.: Integral-functional equations for optimal renovation problems. Optimization 36(3), 249-261 (1996) · Zbl 0860.45004 · doi:10.1080/02331939608844182
[32] Hritonenko, N., Yatsenko, Y.U.: Turnpike properties of optimal delay in integral dynamic models. J. Optim. Theory Appl. 127, 109-127 (2005) · Zbl 1191.49025 · doi:10.1007/s10957-005-6395-2
[33] Jevons, W.S.: The Theory of Political Economy. Macmillan and Co., London (1871)
[34] Kalecki, M.: A macroeconomic theory of the business cycle. Econometrica 3, 327-344 (1935) · JFM 61.1326.06 · doi:10.2307/1905325
[35] Koeva, P.: The Facts About Time-To-Build. IMF Working Paper No.00/138 (2000)
[36] Koushki, P., Al-Rashid, K., Kartam, N.: Delays and cost increases in the construction of private residential projects in Kuwait. Constr. Manag. Econ. 23, 285-294 (2005) · doi:10.1080/0144619042000326710
[37] Kydland, F., Prescott, E.C.: Time to build and aggregate fluctuations. Econometrica 50, 1345-1370 (1982) · Zbl 0493.90017 · doi:10.2307/1913386
[38] Lucas Jr, R.E.: Optimal investment policy and the flexible accelerator. Int. Econ. Rev. 8(1), 78-85 (1967) · doi:10.2307/2525383
[39] Lucas, Jr., R.E.: Distributed lags and optimal investment policy. In: Lucas, R.E., Sargent, T.J. (eds.) Rational Expectations and Econometric Practice, pp. 39-54 University of Minnesota Press, Minneapolis (1981) · Zbl 1151.91069
[40] Mansfield, N., Ugwu, O., Doran, T.: Causes of delay and cost overruns in nigerian construction projects. Int. J. Proj. Manag. 12, 254-260 (1994) · doi:10.1016/0263-7863(94)90050-7
[41] Nerlove, M., Arrow, K.J.: Optimal advertising policy under dynamic conditions. Economica 29(114), 129-142 (1962) · doi:10.2307/2551549
[42] Ortigueira, S., Santos, M.S.: On the speed of convergence in endogenous growth model. Am. Econ. Rev. 87(3), 383-399 (1997)
[43] Palm, C., Peeters, M., Pfann, G.: Adjustment Costs and Time-To-Build in Factor Demand in the US Manufacturing Industry, Studies in Empirical Economics, pp. 83-115. Springer, New York (1994) · Zbl 0825.90101
[44] Park, J.: Gestation Lags with Variable Plans: An Empirical Study of Aggregate Investment, Ph.D. thesis. Carnegie-Mellon University (1984) · Zbl 0493.90017
[45] Pauwels, W.: Optimal dynamic advertising policies in the presence of continuously distributed time lags. J. Optim. Theory Appl. 22(1), 79-89 (1977) · Zbl 0336.90002 · doi:10.1007/BF00936722
[46] Peeters, M.: Persistence, asymmetries and interrelation in factor demand. Scand. J. Econ. 100(4), 747-764 (1998) · Zbl 0919.90011 · doi:10.1111/1467-9442.00134
[47] von Böhm-Bawerk, E.: Capital and Interest: A Critical History of Economical Theory. Macmillan and Company, London (1890) · JFM 22.0241.01
[48] Zhou, C.: Time-to-build and investment. Rev. Econ. Stat. 82(2), 273-282 (2000) · doi:10.1162/003465300558786
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.