The paper analyzes the convergence dynamics of a log-linearized open-economy neoclassical growth model under the assumptions of large adjustment costs for human capital investment, moderate adjustment costs for physical capital investment, and perfect capital mobility. The model can be calibrated for sufficiently slow conditional convergence. The model's dynamics turn out to be richer than the dynamics of the basic neoclassical model due to the imbalance effect between human and physical capital.
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Paper provided by Commission of the EEC - Ecofin, Country Studies in its series Papers with number
144.
Length: 22 pages Date of creation: 1999 Date of revision: Handle: RePEc:fth:eeccou:144
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Find related papers by JEL classification: O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
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