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A Two-Country Model of Endogenous Growth

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Author Info
Roger E. A. Farmer (UCLA)
Amartya Lahiri (Federal Reserve Bank of New York)

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Abstract

We study the competitive equilibria of a two-country endogenous growth model in which the source of growth is the linearity of technology in reproducible inputs. We begin by showing that in a model with no externalities there is a unique equilibrium; however, there are multiple ways in which the social planner can allocate production plans across countries. We then introduce an externality to human capital and we show that the model has multiple equilibria that can be Pareto-ranked. In many of these equilibria there are perfectly foreseen discrete reallocations of capital from one country to another, accompanied by discrete jumps in growth rates. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2004.10.002
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Publisher Info
Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 8 (2005)
Issue (Month): 1 (January)
Pages: 68-88
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Handle: RePEc:red:issued:v:8:y:2005:i:1:p:68-88

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Related research
Keywords: Economic Development Economic Growth Open Economy Macroeconomics Quantitative Dynamic General Equilibrium Analysis Incomplete Markets.

Other versions of this item:

Find related papers by JEL classification:
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October. [Downloadable!] (restricted)
  2. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October. [Downloadable!] (restricted)
  3. Kehoe, Timothy J & Levine, David K & Romer, Paul M, 1992. "On Characterizing Equilibria of Economies with Externalities and Taxes as Solutions to Optimization Problems," Economic Theory, Springer, vol. 2(1), pages 43-68, January.
    Other versions:
  4. Eric W. Bond & Ping Wang & Chong K. Yip, 1993. "A general two sector model of endogenous growth with human and physical capital," Research Paper 9303, Federal Reserve Bank of Dallas.
  5. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June. [Downloadable!] (restricted)
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  6. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December. [Downloadable!] (restricted)
  7. Ellen R. McGrattan, 1998. "A defense of AK growth models," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 13-27. [Downloadable!]
  8. Chamley, Christophe, 1993. "Externalities and Dynamics in Models of "Learning or Doing."," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 583-609, August. [Downloadable!] (restricted)
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  9. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May. [Downloadable!] (restricted)
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  10. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  11. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May. [Downloadable!] (restricted)
  12. Farmer, Roger E A & Lahiri, Amartya, 2002. "Economic Growth in an Interdependent World Economy," CEPR Discussion Papers 3250, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  13. Benhabib, J. & Perli, R., 1993. "Uniqueness and Indeterminacy: Transitional Dynamics in a Model of Endogenous Growth," Working Papers 93-13, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  14. Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996. "A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics," Journal of Economic Theory, Elsevier, vol. 68(1), pages 149-173, January. [Downloadable!] (restricted)
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  15. Robert E. Lucas, Jr., 1989. "On the Mechanics of Economic Development," NBER Reprints 1176, National Bureau of Economic Research, Inc.
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  16. Boldrin, Michele & Rustichini, Aldo, 1994. "Growth and Indeterminacy in Dynamic Models with Externalities," Econometrica, Econometric Society, vol. 62(2), pages 323-42, March. [Downloadable!] (restricted)
  17. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kazuo Mino, 2008. "Preference Structure and Volatility in a Financially Integrated World," Discussion Papers in Economics and Business 08-05, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]
  2. Farmer, Roger E A & Lahiri, Amartya, 2002. "Economic Growth in an Interdependent World Economy," CEPR Discussion Papers 3250, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Jaime Alonso-Carrera & Maria Jesus Freire-Seren & Baltasar Manzano, 2008. "Macroeconomic Effects From The Regional Allocation Of Public Capital Formation," CAMA Working Papers 2008-09, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
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