IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/119391.html
   My bibliography  Save this paper

Numerical Simulation of an Endogenously Growing Economy and Its Balanced Growth Path

Author

Listed:
  • Harashima, Taiji

Abstract

In this paper, I simulate how an economy grows endogenously and reaches a balanced growth path supposing that households behave under the MDC (maximum degree of comfortability)-based procedure, where MDC indicates the state at which a household feels most comfortable with its combination of income and assets. Although it is not easy to numerically simulate the path to a steady state in dynamic economic growth models in which households behave generating rational expectations, it is easy if households are supposed to behave under the MDC-based procedure to reach a steady state. The simulation results indicate that an economy can indeed grow endogenously as predicted theoretically, although some small scale effects exist. If uncompensated knowledge spillovers are restrained, however, large scale effects are generated. A lower degree of risk aversion increases the growth rate. In addition, economies converge if productivities are identical, but they diverge if they are not.

Suggested Citation

  • Harashima, Taiji, 2023. "Numerical Simulation of an Endogenously Growing Economy and Its Balanced Growth Path," MPRA Paper 119391, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:119391
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/119391/1/MPRA_paper_119391.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Harashima, Taiji, 2018. "Do Households Actually Generate Rational Expectations? “Invisible Hand” for Steady State," MPRA Paper 88822, University Library of Munich, Germany.
    3. Robert A. Becker, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(2), pages 375-382.
    4. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    5. Peretto, Pietro F, 1998. "Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
    6. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
    7. Harashima, Taiji, 2010. "Sustainable Heterogeneity: Inequality, Growth, and Social Welfare in a Heterogeneous Population," MPRA Paper 22521, University Library of Munich, Germany.
    8. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
    9. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    10. Harashima, Taiji, 2021. "Consequence of Heterogeneous Economic Rents under the MDC-based Procedure," MPRA Paper 105765, University Library of Munich, Germany.
    11. Dinopoulos, Elias & Thompson, Peter, 1998. "Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-335, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Harashima, Taiji, 2020. "Why Is Risk Aversion Essentially Important for Endogenous Economic Growth?," MPRA Paper 101011, University Library of Munich, Germany.
    2. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    3. Harashima, Taiji, 2010. "An Asymptotically Non-Scale Endogenous Growth Model," MPRA Paper 26025, University Library of Munich, Germany.
    4. Carmelo Pierpaolo Parello, 2022. "Migration and growth in a Schumpeterian growth model with creative destruction [A model of growth through creative destruction]," Oxford Economic Papers, Oxford University Press, vol. 74(4), pages 1139-1166.
    5. Stephen Turnovsky, 2000. "Growth in an Open Economy: Some Recent Developments," Discussion Papers in Economics at the University of Washington 0015, Department of Economics at the University of Washington.
    6. Thomas I. Renström & Luca Spataro, 2015. "Population Growth and Human Capital: A Welfarist Approach," Manchester School, University of Manchester, vol. 83, pages 110-141, December.
    7. Klaus Prettner, 2013. "Population aging and endogenous economic growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 811-834, April.
    8. Klaus Prettner & Alexia Prskawetz, 2010. "Demographic change in models of endogenous economic growth. A survey," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 18(4), pages 593-608, December.
    9. Kaixing Huang, 2016. "Demographic Transition and the Unobservable Scale Effects of Economic Growth," School of Economics and Public Policy Working Papers 2016-08, University of Adelaide, School of Economics and Public Policy.
    10. Eleonora Cavallaro, 2002. "Crescita, ambiente e commercio internazionale in un modello con innovazioni tecnologiche," Working Papers in Public Economics 48, University of Rome La Sapienza, Department of Economics and Law.
    11. Taiji HARASHIMA, 2014. "Sustainable Heterogeneity In Exogenous Growth Models. The Socially Optimal Distribution By Government’S Intervention," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 5(1), pages 73-100.
    12. Gnidchenko, Andrey, 2011. "Моделирование Технологических И Институциональных Эффектов В Макроэкономическом Прогнозировании [Technological and Institutional Effects Modeling in Macroeconomic Forecasting]," MPRA Paper 35484, University Library of Munich, Germany, revised May 2011.
    13. William Darity & Lewis S. Davis, 2005. "Growth, trade and uneven development," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 29(1), pages 141-170, January.
    14. Attar, Mustafa A., 2008. "Science in the Third Dimension of R&D," MPRA Paper 9427, University Library of Munich, Germany.
    15. Cozzi, Guido & Pataracchia, Beatrice & Pfeiffer, Philipp & Marco, Ratto, 2017. "How much Keynes and how much Schumpeter? An Estimated Macromodel of the US Economy," Working Papers 2017-01, Joint Research Centre, European Commission.
    16. Horii, R., 2000. "Emergence of New Industries and Endogenous Growth Cycles," ISER Discussion Paper 0510, Institute of Social and Economic Research, Osaka University.
    17. Katsuhiko Hori & Katsunori Yamada, 2013. "Education, Innovation and Long-Run Growth," The Japanese Economic Review, Japanese Economic Association, vol. 64(3), pages 295-318, September.
    18. Ribeiro, M.J., 2000. "A Nonscale Growth Model with R&D and Human Capital Accumulation," The Warwick Economics Research Paper Series (TWERPS) 574, University of Warwick, Department of Economics.
    19. Lucas Bretschger & Thomas M. Steger, 2004. "The dynamics of economic integration: Theory and policy," International Economics and Economic Policy, Springer, vol. 1(2), pages 119-134, January.
    20. Dalgaard, Carl-Johan & Jensen, Martin Kaae, 2009. "Life-cycle savings, bequest, and a diminishing impact of scale on growth," Journal of Economic Dynamics and Control, Elsevier, vol. 33(9), pages 1639-1647, September.

    More about this item

    Keywords

    Convergence; Endogenous growth; Scale effects; Simulation; Uncompensated knowledge spillovers;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:119391. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.