OPTIMAL GROWTH IN A TWO-SECTOR MODEL OF CAPITAL ACCUMULATION
STANFORD UNIV CA APPLIED MATHEMATICS AND STATISTICS LABS
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Evaluation of the impact of roundabout methods of production upon the welfare of society, as expressed by a discounted sum of per capita consumption. However, since our primary concern is with economic planning in underdeveloped countries, we shall depart with respect to one important point from the two-sector growth model as formulated in 3, 6, 8 which is, in general, concerned with an economy with fairly advanced technology and relatively abundant capital namely, we shall postulate that a certain quantity of consumers goods per capita is required to sustain a given rate of population growth. This restraint becomes ineffective for an economy with relatively abundant capital however, for an economy with low capital-labor ratio and high rate of population growth, it results in the phenomenon frequently referred to as the vicious circle of poverty. In the course of the discussion below on optimal growth, we shall briefly investigate the existence of such a vicious circle and its implications upon patterns of optimal growth.
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