Transitional Dynamics in Two-Sector Models of Endogenous Growth
AbstractWe analyze the steady state and transitional dynamics of two-sector models of endogenous growth. The necessary conditions for endogenous growth imply that transitions depend only on a measure of the imbalance between the two sectors such as the ratio of the two capital stocks. We use the Time-Elimination method to analyze the transitional dynamics. Three main economic forces drive the transition: a Solow effect, a consumption smoothing effect, and a relative wage effect. For plausible parameterizations the consumption smoothing effect tends to dominate the relative wage effect; transition from relatively low levels of physical capital is accomplished through higher work effort rather than higher savings. Copyright 1993, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by MIT Press in its journal Quarterly Journal of Economics.
Volume (Year): 108 (1993)
Issue (Month): 3 (August)
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Other versions of this item:
- Casey B. Mulligan & Xavier Sala-i-Martin, 1992. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," NBER Working Papers 3986, National Bureau of Economic Research, Inc.
- Mulligan, C.B. & Sala-i-Martin, X., 1992. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," Papers 651, Yale - Economic Growth Center.
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