Economic Growth and Structural Change - A Synthesis of the Walrasian General Equilibrium, Ricardian Distribution and Neoclassical Growth Theories

This study proposes an economic growth model of structural change with heterogeneous households. It endogenously determine wealth accumulation and land value. Our model is based on three core theories in economics - Walrasian general equilibrium theory, Ricardian theory of distribution, and neoclassical growth theory. The paper is focused on effects of changes in determinants of the economic dynamics on income and wealth distribution and economic growth. We build an analytical framework for a disaggregate and microfounded general economic growth theory with endogenous wealth accumulation. We simulate the model. We find a unique equilibrium point and confirm stability. We plot the motion of the economy with three groups of households. We also conduct comparative dynamic analyses to get some insights into the complexity of economic growth and wealth and income distribution. For instance, we show that as the group with highest human capital increases its propensity to save, in transitory process the group’s and the other two groups’ wealth levels are enlarged, the national output experiences negative growth; while in the long term the group’s and the other two groups’ wealth levels continue to be enlarged, the national output experiences positive growth. We also demonstrate that if the population of the group whose human capital is lowest (highest) is increased, the wage rates and the wealth levels and consumption levels of consumer good of all the groups are reduced (enhanced).