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Homothetic Multisector Growth Models

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  • Bjarne S. Jensen
  • Ulla Lehmijoki
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    Abstract

    Multi-sector growth (MSG) models have a special aura which is shared with Computable general equilibrium (CGE) models. Both of them, with their many sectors (industries, goods), are known as trying to convert Walrasian general equilibrium systems from an abstract economy representation into workable models with industrial structures changing as actually observed. Yet they are plagued by severe problems. First, they are difficult subjects involving systems of nonlinear equations. Second, their prevalent numerical (algorithmic) methodology offers little in the way of showing a clear overall picture and understanding the plethora of numbers pouring out from model simulations. The great wood is not seen for all the trees. Hence the main objective is to set out comparative-static and dynamic systems for succinctly stating and explicitly solving multisector growth models. The Walrasian general equilibrium is completely stated by one equation and the multisector dynamics by one differential equation. Benchmark solutions are shown for three CES parameter regimes of a ten-sector general equilibrium model.

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    Bibliographic Info

    Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c016_001.

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    Length: 38 pages
    Date of creation: Sep 2011
    Date of revision:
    Handle: RePEc:deg:conpap:c016_001

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    1. Kai Carstensen & Erich Gundlach & Susanne Hartmann, 2008. "The Augmented Solow Model with Mincerian Schooling and Externalities," Kiel Working Papers 1408, Kiel Institute for the World Economy.
    2. Nonneman, Walter & Vanhoudt, Patrick, 1996. "A Further Augmentation of the Solow Model and the Empirics of Economic Growth for OECD Countries," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 943-53, August.
    3. Meckl, Jürgen, 1999. "Structural change and generalized balanced growth," Discussion Papers, Series 1 298, University of Konstanz, Department of Economics.
    4. Arrow, Kenneth J., 1972. "General Economic Equilibrium: Purpose, Analytic Techniques, Collective Choice," Nobel Prize in Economics documents 1972-2, Nobel Prize Committee.
    5. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
    6. Bjarne S. Jensen & Mogens E. Larsen, 2005. "General Equilibrium Dynamics of Multi-Sector Growth Models," DEGIT Conference Papers c010_003, DEGIT, Dynamics, Economic Growth, and International Trade.
    7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    8. Stiglitz, Joseph E, 1969. "Allocation of Heterogeneous Capital Goods in a Two-Sector Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(3), pages 373-90, October.
    9. Bjarne Jensen & Paul Boer & Jan Daal & Peter Jensen, 2011. "Global restrictions on the parameters of the CDES indirect utility function," Journal of Economics, Springer, vol. 102(3), pages 217-235, April.
    10. Bjarne S. Jensen & Preben K. Alsholm & Morgens E. Larsen & Jens Martin Jensen, 2005. "Dynamic Structure, Exogeneity, Phase Portraits, Growth Paths, and Scale and Substitution Elasticities," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 59-89, 02.
    11. Bjarne S. Jensen, 2009. "Dynamic Extensions of the Solow Growth Model (1956): Editorial," German Economic Review, Verein für Socialpolitik, vol. 10, pages 378-383, November.
    12. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521319867, April.
    13. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
    14. Bjarne Jensen & Mogens Larsen, 2005. "General equilibrium dynamics of multi-sector growth models," Journal of Economics, Springer, vol. 10(1), pages 17-56, December.
    15. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-52, May.
    16. Olivier Grandville, 1997. "Curvature and the elasticity of substitution: Straightening it out," Journal of Economics, Springer, vol. 66(1), pages 23-34, February.
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