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Transitional Dynamics Of An Endogenous Growth Model With An Erosion Effect


The convergence features of an endogenous growth model with physical capital, human capital and R&D have been studied. We add an erosion effect (supported by empirical evidence) to this model, and fully characterize its convergence properties. The dynamics is described by a fourth-order system of differential equations. We show that the model converges along a one-dimensional stable manifold and that its equilibrium is saddle-path stable, for most plausible values for the parameters. We also argue that one of the implications of considering this 'erosion effect' is the increase in the adherence of the model to data. Copyright � 2008 The Author. Journal compilation � 2008 Blackwell Publishing Ltd and The University of Manchester.

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Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 76 (2008)
Issue (Month): 4 (07)
Pages: 436-452

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Handle: RePEc:bla:manchs:v:76:y:2008:i:4:p:436-452
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  1. Robert Tamura, 2002. "Human capital and economic development," FRB Atlanta Working Paper 2002-5, Federal Reserve Bank of Atlanta.
  2. Galor, Oded, 2005. "From Stagnation to Growth: Unified Growth Theory," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 4, pages 171-293 Elsevier.
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  16. Arnold, Lutz G., 1998. "Growth, Welfare, and Trade in an Integrated Model of Human-Capital Accumulation and Research," Journal of Macroeconomics, Elsevier, vol. 20(1), pages 81-105, January.
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