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An Integration of Solow’s Growth and Dixit-Stiglitz’s Monopolistic Competition Models

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  • Wei-Bin Zhang

    (Ritsumeikan Asia Pacific University, Japan)

Abstract

This study proposes an economic growth model with perfectly competitive and monopolistic competitive market structures. Our model is based on two core models in two mainstreams of economic theories. One is the Solow model in neoclassical growth theory. The other one is the Dixit-Stiglitz model of monopolistic competition. The unique contribution of this research is to integrate the two models in a comprehensive framework. It endogenously determines profit which is equally distributed among the homogeneous population. We examine the role of perfect competition and monopolistic competition in economic growth. We build and then simulate the model. We find a unique equilibrium point and confirm stability. We plot the motion of the economy and conduct comparative dynamic analyses to get some insights into the complexity of economic growth.

Suggested Citation

  • Wei-Bin Zhang, 2018. "An Integration of Solow’s Growth and Dixit-Stiglitz’s Monopolistic Competition Models," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 68(4), pages 3-19, October-D.
    • Handle: RePEc:spd:journl:v:68:y:2018:i:4:p:3-19
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    References listed on IDEAS

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    Cited by:

    1. Wei-Bin Zhang, 2019. "Competition versus Monopolistic Competition by Integrating Solow-Uzawa and Dixit-Stiglitz," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 390-400, December.

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    More about this item

    Keywords

    Solow model; monopolistic competition; Dixit-Stiglitz model; wealth accumulation; profit;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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