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A note on global dynamics and imbalance effects in the Lucas-Uzawa model

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  • Raouf Boucekkine
  • B. Martínez
  • J. R. Ruiz-Tamarit

Abstract

In the traditional literature on the Lucas-Uzawa model, it is proved that in the neighborhood of the long-run balanced growth path, human capital stock grows at a rate greater than its long-run counterpart when the ratio physical to human capi- tal is above its long run value if and only if the capital share in the production of physical good is lower than the inverse of the elasticity of intertemporal substitution in consumption. We first prove that the claim is true outside the neighborhood of balanced growth paths. More importantly, we identify a crucial asymmetry: what- ever the position of the capital share with respect to the inverse of the elasticity of intertemporal substitution, physical capital stock always grows at a rate lower than its long-run counterpart when the ratio physical to human capital is above its long run value.

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Bibliographic Info

Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2007_26.

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Date of creation: Sep 2007
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Handle: RePEc:gla:glaewp:2007_26

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Keywords: Lucas-Uzawa; hypergeometric functions; imbalance e®ects; global dynamics.;

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References

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  1. Mulligan, Casey B & Sala-i-Martin, Xavier, 1993. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 739-73, August.
  2. BOUCEKKINE, Raouf & RUIZ-TAMARIT, Ramon, 2004. "Special functions for the study of economic dynamics: The case of the Lucas-Uzawa model," CORE Discussion Papers 2004084, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Benhabib Jess & Perli Roberto, 1994. "Uniqueness and Indeterminacy: On the Dynamics of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 63(1), pages 113-142, June.
  4. d'Albis, Hippolyte & Le Van, Cuong, 2006. "Existence of a competitive equilibrium in the Lucas (1988) model without physical capital," Journal of Mathematical Economics, Elsevier, vol. 42(1), pages 46-55, February.
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Cited by:
  1. Brito, Paulo & Venditti, Alain, 2010. "Local and global indeterminacy in two-sector models of endogenous growth," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 893-911, September.
  2. De, Supriyo, 2014. "Intangible capital and growth in the ‘new economy’: Implications of a multi-sector endogenous growth model," Structural Change and Economic Dynamics, Elsevier, vol. 28(C), pages 25-42.
  3. Hassan Benchekroun & Cees Withagen, 2008. "Global Dynamics In A Growth Model With An Exhaustible Resource," Departmental Working Papers 2008-01, McGill University, Department of Economics.
  4. Raouf Boucekkine & Blanca Martínez & Ramon Ruiz-Tamarit, 2011. "Growth vs level effect of population change on economic development: An inspection into human-capital-related mechanisms," Working Papers halshs-00632888, HAL.
  5. Ruiz-Tamarit, J.R. & Ventura-Marco, M., 2011. "Solution to nonlinear MHDS arising from optimal growth problems," Mathematical Social Sciences, Elsevier, vol. 61(2), pages 86-96, March.
  6. Youyou Baende Bofota & Raouf Boucekkine & Alain Pholo Bala, 2012. "Social Capital as an Engine of Growth. Multisectoral Modelling and Implications," AMSE Working Papers 1204, Aix-Marseille School of Economics, Marseille, France.
  7. Roy Cerqueti & Raffaella Coppier & Gustavo Piga, 2011. "Corruption, Growth and Ethnic Fractionalization: a Theoretical Model," CEIS Research Paper 216, Tor Vergata University, CEIS, revised 08 Nov 2011.

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