Optimal Investment in Heterogeneous Capital and Technology Under Restricted Natural Resource |
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Authors: | Raouf Boucekkine Natali Hritonenko Yuri Yatsenko |
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Institution: | 1. Aix-Marseille University, School of Economics, CNRS and EHESS, Marseille, France 2. IRES-CORE, UCLouvain, Louvain-la-Neuve, Belgium 3. Prairie View A&M University, Prairie View, USA 4. Houston Baptist University, Houston, USA
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Abstract: | We consider the optimal control of nonlinear integral equations with endogenous delay and state constraints, which describe a developing economy subjected to resource constraints. The economy invests in new resource-efficient technologies, invests in new capital, and scraps obsolete capital. We derive the optimality condition and determine long-term asymptotically exponential trajectories that optimally combine scrapping the dirtiest capital and developing new clean technologies. Next, we study the short-term dynamics of the model and show that it leads to a sustainable growth with active resource constraint. |
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