A note on the allocation of investment

It is shown by example that the results obtained by Gruver [11 concerning specialization of investment in either directly productive or pollution control capital arise because of an implicit linearity assumption on the underlying technology. Utilizing a strictly concave “eighth sphere” technology, results are obtained which imply joint investment in the two types of capital except in “rare” instances. The results indicate the need for incorporating more general technologies into the analysis of such problems.