U-shaped Paths of Consumption and Physical Capital in Lucas-type Growth Models
This paper considers transitional dynamics of consumption and physical capital in Lucas-type growth models. We find that when the ratio of physical to human capital is sufficiently high, it is optimal for both consumption and physical capital to fall for a finite period and then rise along their transition paths. Endogenous growth models may therefore not be able to generate a sustainable path of development when the steady state coexists with the transitional dynamics. According to the extent of consumption smoothing, we characterize the stages of transition in three different growth regimes. Particularly in the normal and paradoxical cases, dynamics of the Lucas model is contrasted with that of Ramsey.
|Date of creation:||05 Nov 2002|
|Date of revision:|
|Note:||Type of Document - pdf; prepared on pc; pages: 30|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996. "A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics," Journal of Economic Theory, Elsevier, vol. 68(1), pages 149-173, January.
- Santos, Manuel S. & Ortigueira, Salvador & Ladrón de Guevara, Antonio, 1994.
"Equilibrium dynamics in two-sector models of endogenous growth,"
UC3M Working papers. Economics
2913, Universidad Carlos III de Madrid. Departamento de Economía.
- Ladron-de-Guevara, Antonio & Ortigueira, Salvador & Santos, Manuel S., 1997. "Equilibrium dynamics in two-sector models of endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 115-143, January.
- Antonio Ladron de Guevara & Salvador Ortigueira & Manuel S. Santos, 1994. "Equilibrium Dynamics in Two-Sector Models of Endogenous Growth," Working Papers 9403, Centro de Investigacion Economica, ITAM.
- Hanley, Nick, 2000. " Macroeconomic Measures of 'Sustainability.'," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 1-30, February.
- Ortigueira, Salvador, 1998.
"Fiscal policy in an endogenous growth model with human capital accumulation,"
Journal of Monetary Economics,
Elsevier, vol. 42(2), pages 323-355, July.
- Salvador Ortigueira, 1996. "Fiscal Policy in an Endogenous Growth Model with Human Capital Accumulation," Working Papers 9609, Centro de Investigacion Economica, ITAM.
- Bond, Eric W. & Wang, Ping & Yip, Chong K., 1993. "A general two sector model of endogenous growth with human and physical capital," Working Papers 9303, Federal Reserve Bank of Dallas.
- Casey B. Mulligan & Xavier Sala-i-Martin, 1993. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 739-773.
- Lutz G. Arnold, 2000. "Endogenous technological change: a note on stability," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(1), pages 219-226.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpdc:0211002. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.