Two-Sector Endogenous Growth Approach ∗ (original) (raw)

A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics

Journal of Economic Theory, 1996

We examine a two-sector endogenous growth model with general constantreturn-to-scale production technologies governing the evolution of human and physical capital. We prove the existence, uniqueness, and saddle-path stability of the balanced growth equilibrium. A dual approach drawing on techniques from international trade theory is used to provide complete characterization of the transitional dynamics of consumption, goods and education outputs, human and physical capital inputs, and the relative price of human capital investment. We investigate the long-run effects of changes in time preference and factor taxation, and show the emergence of instability or indeterminacy when factor taxes are too distortionary.

Equilibrium dynamics in two-sector models of endogenous growth

Journal of Economic Dynamics & Control, 1997

_ This paper presents an account of the dynamics of endogenous growth models with physical capital and human capital. We consider some important extensions of the basic framework of and Uzawa (1964), including physical capital in the human capital technology and leisure activities as an additional argument of agents' welfare.

Equilibrium dynamics in the one-sector endogenous growth model with physical and human capital

Journal of Economic Dynamics and Control, 2003

This paper concerns the transitional dynamics of the one sector endogenous growth model with physical and human capital when gross investments are irreversible. It has been claimed that the transition path is on the stable saddle path of the system that describes the dynamics of the economy as long as the constraint on nonnegative gross investment in one of the factors is binding. We show that this does not have to be the case. The dynamics can be determined by noting that the continuity of the shadow prices involves the continuity of the consumption path.

Human Capital Accumulation and Endogenous Growth in a Dual Economy

2006

This paper develops an endogenous growth model of a dual economy where human capital accumulation is the source of economic growth. The dualism between the rich individuals and the poor individuals exists in the mechanism of human capital accumulation. Rich individuals allocate labour time not only for their own production and knowledge accumulation but also to train the poor individuals. Steady-state growth paths are studied for Market Economy (Decentralised Economy) and Command Economy. Optimal tax policy that helps to achieve steady-state growth rate of command economy through market economy is also derived.

Efficient Subsidization of Human Capital Accumulation with Overlapping Generations and Endogenous Growth

SSRN Electronic Journal

This paper studies second-best policies in an OLG model in which endogenous growth results from human capital accumulation. When young, individuals decide on education, saving, and nonqualified labour. When old, individuals supply qualified labour. Growth equilibria are inefficient in laissez-faire because of distortionary taxation. The inefficiency is exacerbated if selfish individuals externalize the positive effect of education on descendents' productivity. It is shown to be second best not to distort education if the human capital investment function is isoelastic. If the function is not isoelastic, a case is made for subsidizing education even relative to the first best.

Optimal accumulation in an endogenous growth setting with human capital

Journal of Economic Theory, 2007

This paper considers a three-overlapping-generations model of endogenous growth wherein human capital is the engine of growth. It first contrasts the laissez-faire and the optimal solutions. Three possible accumulation regimes are distinguished. Then it discusses a standard set of tax-transfer instruments that allow for decentralization of the social optimum.

A two-sector overlapping generations model with heterogeneous capital

Economic Theory, 2003

This paper characterizes the existence and stability properties of steady state solutions as well as the nature of transition paths of a two-sector growth model with heterogeneous capital. It compares the properties of a Cobb-Douglas-Leontief economy with heterogeneous capital with the properties of the same economy with homogeneous capital. The model with heterogeneous capital reveals a set of characteristics different to those of the model with homogeneous capital. These include the saddle-path stability of the non-trivial steady state as well as the possibility of overshooting and in contrast to the homogeneous capital case, the possibility of damped oscillations along the transition path for realistic parameter values.

Heterogeneous Capital in a Two-Sector Overlapping-Generations Model

Metroeconomica, 1997

In a seminal paper Galor (1992) investigated the equilibrium dynamics of the well-known neoclassical two-sector growth models of the sixties within an overlapping-generations (OLG) model of the Samuelson (1958)-Diamond (1965) type. In accordance with the aggregative structure of these neoclassical growth models Galor assumed two production sectors and only one homogeneous capital good. This paper utilises the techniques which Galor developed for the homogeneous capital case in order to analyse the equilibrium dynamics of a two-sector OLG model with heterogeneous capital and static price expectations of agents. The temporary and intertemporal equilibrium characteristics of this model structure are then applied to the inconclusive Filippi (1980)-Morishima (1980) controversy over the logical consistency of Morishima's (1977) reformulation of Walras' capital theory.