Abstract
“Bang-bang” investment in a two-sector growth model with immobile capital is “rational” and leads to a unique and globally stable long-run equilibrium along a “sliding trajectory.” This steady state coincides with the stationary equilibrium in the traditional model with non-sector-specific capital.
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This article was written while the authors were visiting scholars at Cornell University. We gratefully acknowledge financial assistance from the Erasmus University Trust Fund and the Netherlands Scientific Organization. We would like to thank, without implicating, two anonymous referees, Martijn Herrmann, Jean-Marie Viaene, Claus Weddepohl, and the participants of seminars at the University of Maryland, the University of Montreal, and Erasmus University Rotterdam for perceptive remarks and useful comments. Jeroen Hinloopen and Rien Wagenvoort provided able graphical assistance. The views expressed in this article are those of the authors and not necessarily those of the World Bank.
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van Marrewijk, C., Verbeek, J. Sector-specific capital, “Bang-bang” investment, and the Filippov solution. Zeitschrift für Nationalökonomie 57, 131–146 (1993). https://doi.org/10.1007/BF01237411
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DOI: https://doi.org/10.1007/BF01237411