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Transition dynamics in an AK growth model under wage rigidity

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  • Greiner, Alfred

Abstract

In this paper, we analyze the so-called AK endogenous growth model with persistent unemployment due to wage rigidities that result from labor market imperfections. We demonstrate that the existence of a balanced growth path implies that it is unique or that there exist two balanced growth paths, depending on the structural parameters of the model. The balanced growth path associated with the higher growth rate is saddle point stable, whereas the path yielding the lower long-run growth rate is either stable or unstable. Further, we show that a Hopf bifurcation may arise, giving rise to persistent limit cycles.

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  • Greiner, Alfred, 2012. "Transition dynamics in an AK growth model under wage rigidity," Mathematical Social Sciences, Elsevier, vol. 63(1), pages 50-56.
  • Handle: RePEc:eee:matsoc:v:63:y:2012:i:1:p:50-56
    DOI: 10.1016/j.mathsocsci.2011.09.005
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    References listed on IDEAS

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    11. Alfred Greiner, 2003. "On the dynamics of an endogenous growth model with learning by doing," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(1), pages 205-214, January.
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