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- Title
THE DYNAMIC PROPERTIES OF ENDOGENOUS GROWTH MODELS.
- Authors
Sedgley, Norman; Elmslie, Bruce
- Abstract
This paper explores the dynamics of semiendogenous versus fully endogenous growth models in “lab equipment” specifications of the models with expanding sectors. Capital is allowed to accumulate and is used, together with other inputs, to produce new knowledge. The stability of the steady state path is found to be determined by the inequality and/or knife-edge restrictions needed to produce steady state growth. This paper takes the ratio of the shadow price of capital to knowledge and the level of consumption as jump variables. Semiendogenous growth models lead to a 4 × 4 dynamic system where the sign of the coefficient matrix of the log linearized dynamic system is indefinite, leading to a potential for both stable and unstable equilibria. The knife-edge restrictions needed to generate policy influences on growth are shown to be restrictions that reduce the system to 3 × 3 with a positive definite coefficient matrix, thereby guaranteeing a globally stable equilibrium. Implications for empirical testing are addressed.
- Subjects
MATHEMATICAL models of economic development; ECONOMIC models; ENDOGENOUS growth (Economics); ECONOMIC sectors; HUMAN capital; EMPIRICAL research
- Publication
Macroeconomic Dynamics, 2013, Vol 17, Issue 5, p1118
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S1365100512000119