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Optimal Growth Strategy Under Dynamic Threshold

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  • Cuong Le Van
  • Cagri Saglam
  • Agah Turan

Abstract

We consider an economy in which the technology exhibits nonconvexities due to fixed costs associated with production. Taking into account the incentives for investment to decrease fixed costs, we characterize the circumstances under which an underdeveloped economy can catch up with the developing ones. We show that it is optimal to get rid of the fixed costs inherent in production in finite time provided that the initial level of fixed costs are not too high and the technology for reducing fixed costs is sufficiently efficient. Indeed, we obtain that even though the income disparities may be very persistent and can be perceived as poverty traps, economies with not very high initial fixed costs and sufficiently efficient technology for reducing fixed costs would ultimately converge to the same steady state level of per capita income.
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(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Cuong Le Van & Cagri Saglam & Agah Turan, 2014. "Optimal Growth Strategy Under Dynamic Threshold," Working Papers 2014-123, Department of Research, Ipag Business School.
    • Handle: RePEc:ipg:wpaper:2014-123
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    References listed on IDEAS

    as
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    11. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1353-1375, June.
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    Cited by:

    1. Pham, Ngoc-Sang & Pham, Thi Kim Cuong, 2020. "Effects of foreign aid on the recipient country’s economic growth," Journal of Mathematical Economics, Elsevier, vol. 86(C), pages 52-68.
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    3. Cuong Le Van & Anh Ngoc Nguyen & Ngoc‐Minh Nguyen & Michel Simioni, 2018. "Growth strategy with social capital, human capital and physical capital—Theory and evidence: The case of Vietnam," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(5), pages 768-787, October.
    4. Le Van, Cuong & Pham, Ngoc-Sang & Pham, Thi Kim Cuong, 2023. "Effects of development aid (grants and loans) on the economic dynamics of the recipient country," Mathematical Social Sciences, Elsevier, vol. 125(C), pages 101-112.
    5. Magris, Francesco & Onori, Daria, 2024. "Taylor and fiscal rules: When do they stabilize the economy?," Mathematical Social Sciences, Elsevier, vol. 128(C), pages 68-89.
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    9. Le Van, Cuong & Pham, Ngoc-Sang & Pham, Thi Kim Cuong, 2021. "Development loans, poverty trap, and economic dynamics," MPRA Paper 110870, University Library of Munich, Germany.
    10. repec:ipg:wpaper:2014-558 is not listed on IDEAS
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    14. Thanh Tam Nguyen-Huu & Ngoc-Sang Pham, 2021. "Escaping the middle income trap and getting economic growth: How does FDI can help the host country?," Working Papers halshs-03143087, HAL.
    15. repec:ipg:wpaper:2014-572 is not listed on IDEAS
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    20. Ken-Ichi Akao & Takashi Kamihigashi & Kazuo Nishimura, 2015. "Critical Capital Stock in a Continuous-Time Growth Model with a Convex-Concave Production Function," Discussion Paper Series DP2015-39, Research Institute for Economics & Business Administration, Kobe University.
    21. repec:ipg:wpaper:2014-570 is not listed on IDEAS
    22. Thanh Tam Nguyen-Huu & Ngoc‐sang Pham, 2023. "FDI spillovers, New Industry Development, and Economic Growth," Post-Print hal-04240260, HAL.
    23. repec:ipg:wpaper:2014-498 is not listed on IDEAS
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    25. repec:ipg:wpaper:2014-554 is not listed on IDEAS

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