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Stability in a Three-Sector Dynamic Growth Model with Endogenous Labor Supply

Author

Listed:
  • Loretti I. Dobrescu

    (School of Economics, The University of New South Wales)

  • Mihaela Neamtu

    (Department of Economic Informatics and Statistics, West University of Timisoara)

  • Dumitru Opris

    (Department of Applied Mathematics, West University of Timisoara)

Abstract

This paper explores the stability of the stationary state for a dynamic growth model with wealth and human capital accumulation. Knowledge is created through research and learning-by-doing, while the time allocation between labor and leisure is endogenized. We analyze the model in both its deterministic and stochastic versions. First, we describe the deterministic model and analyze the stationary state. Second, using the stationary state, we defi…ne the stochastic perturbation and study the mean and squared mean values of the system states for the linearized model. Third, we prove that for certain parameters, the stationary state is asymptotically stable both in the deterministic and the stochastic model. Finally, we perform the comparative dynamic analysis for the propensities to save and to enjoy leisure, the tax rates used to finance research, and the knowledge utilization efficiency.

Suggested Citation

  • Loretti I. Dobrescu & Mihaela Neamtu & Dumitru Opris, 2011. "Stability in a Three-Sector Dynamic Growth Model with Endogenous Labor Supply," Discussion Papers 2012-10, School of Economics, The University of New South Wales.
    • Handle: RePEc:swe:wpaper:2012-10
    as

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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2012-10.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    labor; human capital; capital accumulation; economic growth.;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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