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Adjustment Costs in a Two-Capital Growth Model

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  • Petr Duczynski

Abstract

The paper analyzes the convergence dynamics of a log-linearized open-economy neoclassical growth model under the assumptions of large adjustment costs for human capital investment, moderate adjustment costs for physical capital investment, and perfect capital mobility. The model can be calibrated for sufficiently slow conditional convergence. The model's dynamics turn out to be richer than the dynamics of the basic neoclassical model due to the imbalance effect between human and physical capital.

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  • Petr Duczynski, 1999. "Adjustment Costs in a Two-Capital Growth Model," CERGE-EI Working Papers wp144, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp144
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