Transitional Dynamics in an Endogenous Growth Model with Heterogeneous Consumption Goods
AbstractWe analyze the transitional dynamics of an endogenous growth model with heterogeneous consumption goods. In this model, convergence is driven by two different forces: the diminishing returns to capital and the growth of the relative price between physical and human capital. Because this second force arises only when heterogenous consumption goods are introduced, the transitional dynamics in this model exhibits two interesting differences with respect to the transitional dynamics in the standard two-sector growth model with a unique consumption good. First, the initial growth effect of a shock in one of the capital stocks may be the opposite to the one obtained in a model with a unique consumption good. Second, the consumption growth rate exhibits a non-monotonic behavior along the transition when the two forces have opposite growth effects.
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Bibliographic InfoPaper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c014_018.
Length: 27 Pages
Date of creation: Jun 2009
Date of revision:
endogenous growth; consumption growth; transitional dynamics;
Find related papers by JEL classification:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
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