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A Two-Sector Model of Creative Capital Driven Regional Economic Growth

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  • Batabyal, Amitrajeet
  • Nijkamp, Peter

Abstract

We study aspects of economic growth in a region that is creative in the sense of Richard Florida. We model creativity by supposing that the region under study has two sectors. The first sector uses physical capital {K(t)} and trained workers {A(t)W(t)} to produce creative capital {R(t)}. The second sector uses physical and creative capital to produce a final consumption good {Q(t)}. In this setting, we accomplish four tasks. First, we derive the equations of motion for physical capital per trained worker (k) and creative capital per trained worker (r). Second, we find combinations of k and r for which k ̇=r ̇=0. Third, we investigate whether the economy of our creative region has a balanced growth path (BGP). Finally, assuming that our region is initially on a BGP, we study the impact of a permanent increase in the savings rate (s) on the trajectory of output per worker.

Suggested Citation

  • Batabyal, Amitrajeet & Nijkamp, Peter, 2017. "A Two-Sector Model of Creative Capital Driven Regional Economic Growth," MPRA Paper 79572, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79572
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    References listed on IDEAS

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    1. Batabyal, Amitrajeet A. & Nijkamp, Peter, 2016. "Creative capital in production, inefficiency, and inequality: A theoretical analysis," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 553-558.
    2. Richard Florida, 2014. "The Creative Class and Economic Development," Economic Development Quarterly, , vol. 28(3), pages 196-205, August.
    3. Usman, Umer & Batabyal, Amitrajeet A., 2014. "Goods production, learning by doing, and growth in a region with creative and physical capital," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 92-99.
    4. Richard Florida & Charlotta Mellander, 2016. "The Geography of Inequality: Difference and Determinants of Wage and Income Inequality across US Metros," Regional Studies, Taylor & Francis Journals, vol. 50(1), pages 79-92, January.
    5. Amitrajeet A. BATABYAL, 2016. "Increasing Returns In A Model With Creative And Physical Capital: Does A Balanced Growth Path Exist?," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(3), pages 31-35, December.
    6. Amitrajeet A Batabyal & Hamid Beladi, 2016. "Creative capital accumulation and the advancement of India's creative economy," Environment and Planning C, , vol. 34(2), pages 356-363, March.
    7. Reza Oladi & Hamid Beladi, 2008. "Is Regionalism Viable? A Case for Global Free Trade," Review of International Economics, Wiley Blackwell, vol. 16(2), pages 293-300, May.
    8. Amitrajeet Batabyal & Peter Nijkamp, 2010. "Richard Florida’s creative capital in a trading regional economy: a theoretical investigation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(2), pages 241-250, April.
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    Cited by:

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    More about this item

    Keywords

    Balanced Growth Path; Consumption Good; Creative Capital; Creative Region; Economic Growth;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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