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Transitional Dynamics in the Uzawa-Lucas Model of Endogenous Growth

  • Dirk Bethmann

In this paper we solve an N N N players differential game with logarithmic objective functions. The optimization problem considered here is based on the Uzawa Lucas model of endogenous growth. Agents have logarithmic preferences and own two capital stocks. Since the number of players is an arbitrary fixed number N N N the model's solution is more realistic than the idealized concepts of the social planer or the competitive equilibrium. We show that the symmetric Nash equilibrium is completely described by the solution to one single ordinary differential equation. The numerical results imply that the influence of the externality along the balanced growth path vanishes rapidly as the number of players increases. Off the steady state the externality is of great importance even for a large number of players.

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File URL: http://degit.sam.sdu.dk/papers/degit_09/C009_014.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c009_014.

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Length: 18 pages
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:deg:conpap:c009_014
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  1. Brunner, Martin & Strulik, Holger, 2002. "Solution of perfect foresight saddlepoint problems: a simple method and applications," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 737-753, May.
  2. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  3. Mulligan, Casey B & Sala-i-Martin, Xavier, 1993. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 739-73, August.
  4. Casey B. Mulligan & Xavier Sala-i-Martin, 1991. "A Note on the Time-Elimination Method For Solving Recursive Dynamic Economic Models," NBER Technical Working Papers 0116, National Bureau of Economic Research, Inc.
  5. Eric W. Bond & Ping Wang & Chong K. Yip, 1993. "A general two-sector model of endogenous growth with human and physical capital: balanced growth and transitional dynamics," Research Paper 9324, Federal Reserve Bank of Dallas.
  6. repec:cup:cbooks:9780521637329 is not listed on IDEAS
  7. Danyang Xie, 2002. "Divergence in Economic Performance: Transitional Dynamics with Multiple Equilibria," GE, Growth, Math methods 0210002, EconWPA.
  8. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
  9. Rubio, Santiago J. & Casino, Begona, 2001. "Competitive versus efficient extraction of a common property resource: The groundwater case," Journal of Economic Dynamics and Control, Elsevier, vol. 25(8), pages 1117-1137, August.
  10. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-67, December.
  11. P.M. Hartley & L.C.G. Rogers, 2005. "Two-Sector Stochastic Growth Models ," Australian Economic Papers, Wiley Blackwell, vol. 44(4), pages 322-351, December.
  12. Benhabib Jess & Perli Roberto, 1994. "Uniqueness and Indeterminacy: On the Dynamics of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 63(1), pages 113-142, June.
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