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A Dynamic Model of Investment and Endogenous Growth

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  • King, Mervyn A
  • Robson, Mark H

Abstract

Models of endogenous growth assume that private investment in either physical or human capital yields positive externalities to production possibilities as a whole. But what is the structure of such externalities? We present a model of 'learning by watching'which implies a nonlinear relationship between productivity growth and the investment rate. This results in multiple steady-state growth rates in a deterministic setting, and in a rich dynamic structure that generates both growth and cycles in a stochastic model (calibrated by reference to observable shocks to tax rates in the United Kingdom). Economies with identical structures can experience very different growth rates for long periods. The model exhibits path-dependence and history matters. Copyright 1993 by The editors of the Scandinavian Journal of Economics.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 95 (1993)
Issue (Month): 4 (December)
Pages: 445-66

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Handle: RePEc:bla:scandj:v:95:y:1993:i:4:p:445-66

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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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Cited by:
  1. Hollanders,Hugo & Weel,Bas,ter, 1998. "Skill-Biased Technological Change in an Endogenous Growth Model," Research Memorandum 016, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  2. Duo Qin & Marie Anne Cagas & Pilipinas Quising & Xin-Hua He, 2005. "How Much Does Investment Drive Economic Growth in China?," Working Papers 545, Queen Mary, University of London, School of Economics and Finance.
  3. A. Bassanini, 1997. "Localized Technological Change and Path-Dependent Growth," Working Papers ir97086, International Institute for Applied Systems Analysis.
  4. Hollanders,Hugo & Weel,Bas,ter, 1999. "Skill-Biased Technical Change: On Endogenous Growth, Wage Inequality and Government Intervention," Research Memorandum 013, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  5. Shishir Saxena, 2007. "Technology And Spillovers: Evidence From Indian Manufacturing Micro-Data," Development Research Unit Working Paper Series 27-07, Monash University, Department of Economics.
  6. Raimundo Soto, . "El Tipo de Cambio Real de Equilibrio: Un modelo no lineal de Series de Tiempo," ILADES-Georgetown University Working Papers inv094, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  7. Keshab Bhattarai, 2007. "Input–Output and General Equilibrium Models for Hull and Humber Region in England," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(4), pages 473-490, December.
  8. Raimundo Soto, . "Nonlinearities in the Demand for money: A Neural Network Approach," ILADES-Georgetown University Working Papers inv107, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.

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