Transitional Dynamics in the Uzawa-Lucas Model of Endogenous Growth
We introduce an easy way of analyzing the transitional dynamics of the Uzawa-Lucas endogenous growth model. We use the value function approach to solve both the social planner?s optimization problem and the representative agent?s optimization problem in the decentralized economy. The complexity of the Hamilton-Jacobi-Bellman equation is significantly reduced to a one-dimensional initial value problem for an ordinary differential equation. This approach allows us to find the optimal controls for the non-concave Hamiltonian in the centralized economy and to detect multiple transition paths in the decentralized economy for a large external effect, which are hidden when using the maximum principle. We simulate the global transitional dynamics towards the balanced growth path. The adjustment of the model?s state variable turns out to accelerate along the transition paths. By the asymmetry of the sectors an until now unknown feature is predicted for the adjustment in the output growth rate. Its relative speed follows a hump-shaped course: Starting from a relative scarcity in physical capital, the growth rate of output decelerates first before it starts rising again.
|Date of creation:||2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.wiwi.hu-berlin.de/
More information through EDIRC
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.:
- 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.
- 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.
- 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.
- Xie Danyang, 1994.
"Divergence in Economic Performance: Transitional Dynamics with Multiple Equilibria,"
Journal of Economic Theory,
Elsevier, vol. 63(1), pages 97-112, June.
- Danyang Xie, 2002. "Divergence in Economic Performance: Transitional Dynamics with Multiple Equilibria," GE, Growth, Math methods 0210002, EconWPA.
- 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.
- Martin Brunner & Holger Strulik, 2002. "Code for "Solution of Perfect Foresight Sattlepoint Problems: A Simple Method and Applications"," QM&RBC Codes 93, Quantitative Macroeconomics & Real Business Cycles.
- Robert J. Barro, 1995.
"Inflation and Economic Growth,"
NBER Working Papers
5326, National Bureau of Economic Research, Inc.
- 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.
- 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.
- Mulligan, C.B. & Sala-i-Martin, X., 1992. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," Papers 651, Yale - Economic Growth Center.
- Casey B. Mulligan & Xavier Sala-i-Martin, 1992. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," NBER Working Papers 3986, National Bureau of Economic Research, Inc.
- 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.
- 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.
- repec:cup:cbooks:9780521637329 is not listed on IDEAS
- 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.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
When requesting a correction, please mention this item's handle: RePEc:zbw:sfb373:200317. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.