Complicated Dynamics and Parametric Restrictions in the Robinson-Solow-Srinivasan (RSS) Model

The delineation of the optimal policy function (OPF) in the discounted setting has remained an open question since the 2005 demonstration of optimal topological chaos (OTC) in a particular instance of the 2-sector RSS model. This paper provides an explicit solution of the OPF when the discount factor is less than the labor/capital-output ratio a. With OTC conceived both as period-three cycles and turbulence, it establishes the existence of OTC for non-negligible parametric ranges of the model, shows the identified ranges also to be necessary, presents exact restrictions on a, and extends the 1996 Mitra-Nishumura-Yano theorems on discount-factor restrictions.