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Education, Income, Wealth Inequality and Business Cycles in a General Equilibrium Growth Model

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  • Wei-bin Zhang

    (Jumonjibaru Beppu-shi Oita-ken 874-8577, Japan)

Abstract

The paper is concerned with the dynamic interactions between physical capital, human capital, income and wealth inequalities between different households with government subsidy to education. It generalizes the endogenous growth model of a small-open economy proposed by Zhang (2016). Zhang’s paper deals with income and wealth inequalities between heterogeneous households with government subsidy to education. The paper makes a contribution to the literature of economic growth with endogenous education by integrating Solow-Uzawa’s neoclassical growth theory, Uzawa-Lucas model, Arrow’s learning by doing, Zhang’s creative leisure, and Walrasian general equilibrium theory. The model treats endogenous capital and human capital accumulation as the main engines of economic growth. This study generalizes Zhang’s model by allowing constant coefficients to be time-dependent. We simulate the generalized model to demonstrate existence of business cycles due to various exogenous periodic shocks.

Suggested Citation

  • Wei-bin Zhang, 2020. "Education, Income, Wealth Inequality and Business Cycles in a General Equilibrium Growth Model," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 607-618, December.
    • Handle: RePEc:nwe:eajour:y:2020:i:4:p:607-618
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    References listed on IDEAS

    as
    1. Chiarella,Carl & Flaschel,Peter, 2011. "The Dynamics of Keynesian Monetary Growth," Cambridge Books, Cambridge University Press, number 9780521180184.
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    4. Jordi Galí & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 707-734.
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    6. Stella, Andrea, 2015. "Firm dynamics and the origins of aggregate fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 55(C), pages 71-88.
    7. Wei-Bin Zhang, 2016. "Impact of Education Subsidies and Taxation on Wealth and Human Capital Accumulation," Eastern European Business and Economics Journal, Eastern European Business and Economics Studies Centre, vol. 2(3), pages 222-247.
    8. Xavier Gabaix, 2011. "The Granular Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(3), pages 733-772, May.
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    12. Wei-Bin Zhang, 2005. "Differential Equations, Bifurcations, and Chaos in Economics," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 5827, February.
    13. Wei-Bin Zhang, 2020. "The General Economic Theory," Springer Books, Springer, number 978-3-030-56204-5, December.
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    15. Wei-Bin Zhang, 2007. "Economic Growth with Learning by Producing, Learning by Education and Learning by Consuming," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 5(1), pages 21-38.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    business cycles; income and wealth distribution; heterogeneous household;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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