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Global Trade and Business Cycles with Endogenous Human Capital

In: A Dynamic Economic Theory of Heterogenous Households

Author

Listed:
  • Wei-Bin Zhang

    (Ritsumeikan Asia Pacific University, College of International Management)

Abstract

Chapter 13 deals with business cycles in a multi-country growth model with endogenous wealth and human capital accumulation. There are different ideas and theories to explain well-observed business cycles and economic oscillations. The two contemporary theories of business cycles are the Keynesian economics and the real business-cycle theory. The Keynesian economic business cycle theory considers demand changes as the main sources of business cycles. The real business-cycle theory explains business-cycle fluctuations by real shocks. The purpose of this chapter is to demonstrate the existence of business cycles in the dynamic growth model of heterogeneous households. It shows how fluctuations in one country cause business cycles not only in the national economy but also in all the countries in the global economy with free trade. This chapter defines the neoclassical growth model of a multi-country economy with capital accumulation and human capital accumulation and shows that the dynamics of the economy can be described by a set of dimensional differential equations. It shows the effects of exogenous oscillations in the efficiency of applying human capital by country 1’s rich group, country 1’s total productivity, the propensity to save of country 1’s group 1, the return to scale in human capital accumulation of country 1’s group 1, country 1’s depreciation of physical capital, and the depreciation of human capital of country 1’s group 1.

Suggested Citation

  • Wei-Bin Zhang, 2026. "Global Trade and Business Cycles with Endogenous Human Capital," Springer Books, in: A Dynamic Economic Theory of Heterogenous Households, chapter 13, pages 229-247, Springer.
    • Handle: RePEc:spr:sprchp:978-981-95-8918-0_13
    DOI: 10.1007/978-981-95-8918-0_13
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