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

Since the 2005 demonstration of optimal topological chaos in a particular instance of the 2-sector RSS model, the delineation of the optimal policy function for “small” discount factors has remained open. This paper (i) provides an explicit solution when the discount factor is less than the labor/capital-output ratio, (ii) establishes the existence of optimal topological chaos for a non-negligible parametric range of the model, (iii) extends the analysis of Mitra (1996) and Nishumura-Yano (1996) on discount factor restrictions to apply to the RSS case, (iv) presents exact restrictions on the labor/capital-output ratio. The results underscore the initial promise of the RSS model as a “simple model with very complicated dynamics,” May (1976). (112 words) Journal of Economic Literature Classification Numbers: D90, C62, O21.