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A growth model with qualities, varieties, and human capital: stability and transitional dynamics

A growth model with qualities, varieties, and human capital: stability and transitional dynamics Abstract This article analyses the stability properties of the steady-state and the transitional dynamics of an endogenous growth model with human capital, increasing-varieties R&D, and quality-ladders R&D (Strulik, H. 2005. “The Role of Human Capital and Population Growth in R&D-Based Models of Economic Growth.” Review of International Economics 13 (1): 129–145.). We show that when spillovers within R&D sectors are higher than spillovers across the two R&D sectors, the equilibrium is unstable. However, when spillovers between sectors are higher than within, the equilibrium is a saddle-path. This result emphasizes the need for empirical research that compares quantitatively the importance of these two types of spillovers and highlights the importance of studying intersectoral effects between the two R&D sectors. We describe plausible paths of economic development after changes in crucial parameters and uncover some transitional effects that were impossible to detect in the steady-state analysis. We also show that this model’s transition dynamics can mimic the main features of the process of productivity slowdown that began in the 1970s. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Studies in Nonlinear Dynamics & Econometrics de Gruyter

A growth model with qualities, varieties, and human capital: stability and transitional dynamics

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Publisher
de Gruyter
Copyright
Copyright © 2014 by the
ISSN
1081-1826
eISSN
1558-3708
DOI
10.1515/snde-2013-0018
Publisher site
See Article on Publisher Site

Abstract

Abstract This article analyses the stability properties of the steady-state and the transitional dynamics of an endogenous growth model with human capital, increasing-varieties R&D, and quality-ladders R&D (Strulik, H. 2005. “The Role of Human Capital and Population Growth in R&D-Based Models of Economic Growth.” Review of International Economics 13 (1): 129–145.). We show that when spillovers within R&D sectors are higher than spillovers across the two R&D sectors, the equilibrium is unstable. However, when spillovers between sectors are higher than within, the equilibrium is a saddle-path. This result emphasizes the need for empirical research that compares quantitatively the importance of these two types of spillovers and highlights the importance of studying intersectoral effects between the two R&D sectors. We describe plausible paths of economic development after changes in crucial parameters and uncover some transitional effects that were impossible to detect in the steady-state analysis. We also show that this model’s transition dynamics can mimic the main features of the process of productivity slowdown that began in the 1970s.

Journal

Studies in Nonlinear Dynamics & Econometrics – de Gruyter

Published: Dec 1, 2014

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