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The open-loop solution of the Uzawa-Lucas Model of Endogenous Growth with N agents

  • Bethmann, Dirk

We solve an N 2 N player general-sum differential game. 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 2 N, the model?s solution is more general than the idealized concepts of the social planer?s solution with one player or the competitive equilibrium with infinitely many players. We show that the symmetric Nash equilibrium is completely described by the solution to a single ordinary differential equation. The numerical results imply that the influence of the externality along the balanced growth path decreases 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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Paper provided by Humboldt-Universität Berlin, Center for Applied Statistics and Economics (CASE) in its series Papers with number 2004,42.

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Date of creation: 2004
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Handle: RePEc:zbw:caseps:200442
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  1. Mulligan, C.B. & Sala-i-Martin, X., 1992. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," Papers 651, Yale - Economic Growth Center.
  2. 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.
  3. repec:cup:cbooks:9780521637329 is not listed on IDEAS
  4. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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