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Business Cycles in a Two-Sector Growth Model with Heterogeneous Households and Endogenous Human Capital

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  • Wei-Bin Zhang

    (Ritsumeikan Asia Pacific University, Beppu-shi, Japan)

Abstract

This paper generalizes the dynamic growth model of heterogeneous households with wealth accumulation and human capital accumulation proposed by Zhang (2015). The original model deals with economic mechanisms of how the richest one per cent of the population own 50% of national wealth. It shows the dynamic interdependence between wealth accumulation, human capital accumulation, division of labor, and time distribution under perfect competition. The study simulated a case with three groups of the population, the rich 1%, the middle, 69%, and the poor 20%. It demonstrated the existence of an equilibrium point at which the rich 1% own more than half of the national wealth and the poor 20% less than 10% of the national wealth. This study generalizes Zhang's model by making all the time-independent parameters as time-dependent parameters. We demonstrate how the system reacts to exogenous periodic perturbations.

Suggested Citation

  • Wei-Bin Zhang, 2017. "Business Cycles in a Two-Sector Growth Model with Heterogeneous Households and Endogenous Human Capital," Izvestia Journal of the Union of Scientists - Varna. Economic Sciences Series, Union of Scientists - Varna, Economic Sciences Section, issue 1, pages 14-27, November.
    • Handle: RePEc:vra:journl:y:2017:i:1:p:14-27
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Inequality and growth; exogenous shocks; business cycles; learning by consuming; wealth and income distribution; heterogeneous households;
    All these keywords.

    JEL classification:

    • A00 - General Economics and Teaching - - General - - - General

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