On the Dynamics of Basic Growth Models: Ratio Stability vs. Convergence and Divergence in State Space

2009 ◽  
Vol 10 (4) ◽  
pp. 384-400 ◽  
Author(s):  
Thorsten Pampel
Keyword(s):  
State Space ◽  
Growth Models ◽  
Optimal Growth ◽  
Growth Path ◽  
Solow Model ◽  
Initial Capital ◽  
Balanced Growth ◽  
Balanced Growth Path ◽  
Per Capita ◽  
Convergence And Divergence

Abstract We show for a class of basic growth models that convergence in ratios does not imply the pathwise convergence to the corresponding balanced growth path in the state space. We derive conditions on parameters and on the elasticity of the savings function for convergence or divergence and apply our results to the Solow model, an augmented Solow model as well as to an optimal growth model. An implication for the convergence debate is that two economies that differ only in the initial capital stock and converge in per capita terms might diverge to infinity in absolute terms.

Effectiveness versus Efficiency: Growth-Accelerating Policies in a Model of Growth without Scale Effects

2006 ◽  
Vol 7 (3) ◽  
pp. 297-316 ◽  
Author(s):  
Bettina Büttner
Keyword(s):  
Human Capital ◽  
Capital Accumulation ◽  
Scale Effects ◽  
Growth Models ◽  
Human Capital Accumulation ◽  
Growth Path ◽  
Balanced Growth ◽  
Long Run ◽  
Theoretical Finding ◽  
Balanced Growth Path

Abstract Recent R&D growth models without strong scale effects imply that long-run growth rates depend only on parameters that are usually taken to be exogenous. However, integrating human capital accumulation into models of this type, Arnold (2002) demonstrates that subsidizing education accelerates growth. The present paper addresses welfare issues in Arnold’s model. The main theoretical finding of the paper is that a system of subsidies that implements the optimal balanced growth path as a decentralized equilibrium includes zero subsidies to education, while R&D activity should be either subsidized or taxed. To shed further light on the latter result, the model is calibrated and it turns out that along the balanced growth path, the decentralized economy underinvests in R&D, i.e. R&D activities should be subsidized.

Distribution and Endogenous Growth: The Two-Class Pasinetti Model / Verteilung und endogenes Wachstum: Das Zwei-Klassen Modell von Pasinetti

2001 ◽  
Vol 221 (3) ◽  
Author(s):  
Alfred Greiner
Keyword(s):  
Growth Rate ◽  
Income Distribution ◽  
Saddle Point ◽  
Endogenous Growth ◽  
Growth Path ◽  
Balanced Growth ◽  
Positive Externalities ◽  
Balanced Growth Path ◽  
Per Capita

SummaryThe paper extends the two-class Pasinetti model with workers and capitalists to allow for endogenous growth. Sustained per-capita growth results from positive externalities of investment which for its part only occur if workers devote time to education so that an efficient use of new machines is guaranteed. It is shown that there exists a unique balanced growth path which is a saddle point. The effects of raising education on the growth rate as well as on the income distribution between workers and capitalists are studied as well. It is demonstrated that education affects the balanced growth rate and, thus, the income of workers. However, it does not affect the ratio of workers’ income relative to the income of capitalists.

scholarly journals Golden-Rule Level of the Employment

2017 ◽  
Vol 01 (01) ◽  
pp. 1740005 ◽  
Author(s):  
Yong Tao ◽  
Xiangjun Wu
Keyword(s):  
Production Function ◽  
Golden Rule ◽  
Perfect Competition ◽  
Growth Path ◽  
Aggregate Production ◽  
Balanced Growth ◽  
Aggregate Production Function ◽  
Long Time ◽  
Balanced Growth Path ◽  
General Equilibria

The competitive economy, over a long time scale, would produce a large number of general equilibria, each of which can be regarded as a possible microstate of this economy. Then by the principle of maximum entropy, we can obtain the most probable macrostate which in the case of perfect competition involving a single industry will lead to a Solow-type aggregate production function. By this aggregate production function, one can make clear how labors match firms on the balanced growth path. Here, we prove that when the capital stock of a society arrives at the golden-rule level on the balanced growth path, the social employment will reach the best level at which every firm on average employs an optimal amount of workers.

INCOME INEQUALITY AND ECONOMIC GROWTH WITH ALTRUISTIC BEQUESTS AND HUMAN CAPITAL INVESTMENT

2011 ◽  
Vol 16 (S3) ◽  
pp. 331-354 ◽  
Author(s):  
Stuart McDonald ◽  
Jie Zhang
Keyword(s):  
Human Capital ◽  
Income Inequality ◽  
Capital Investment ◽  
Physical Capital ◽  
Output Growth ◽  
Growth Path ◽  
Average Output ◽  
Balanced Growth ◽  
Factor Markets ◽  
Balanced Growth Path

In this paper we explore how income inequality affects growth in a dynastic family model with bequests (physical capital) and investment in human capital for children. For tractability, we abstract from factor markets and focus on household production, which is prevalent in developing countries. We explore a joint distribution of bequests and human capital and track the evolution of income distribution across generations. We show that initial inequality has a positive indirect effect on average output growth by lowering the ratio of physical to human capital, besides its standard negative direct effect. If education is mainly privately (publicly) provided, then income inequality retards (promotes) growth outside the balanced growth path. On the balanced growth path, inequality always hinders growth.

Sign in / Sign up

Export Citation Format

Share Document