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Dynamics of Output Growth, Consumption and Physical Capital in Two-Sector Models of Endogenous Growth

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  • Farhad Nili

Abstract

This paper considers transitional dynamics of a two-sector endogenous growth model in the Uzawa-Lucas framework. We find that when the ratio of physical to human capital is sufficiently high, it is optimal for both consumption and physical capital to fall for a finite period and then gradually rise along their transition path. The paper also shows that for high values of intertemporal elasticity of consumption, rate of growth of output is increasing in the ratio of physical to human capital, while when the elasticity is moderate or low, output growth is U-shaped.

Suggested Citation

  • Farhad Nili, "undated". "Dynamics of Output Growth, Consumption and Physical Capital in Two-Sector Models of Endogenous Growth," Discussion Papers 00/62, Department of Economics, University of York.
    • Handle: RePEc:yor:yorken:00/62
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    References listed on IDEAS

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    1. Lutz G. Arnold, 2000. "Endogenous technological change: a note on stability," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(1), pages 219-226.
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    3. Stephen J. Turnovsky, 2000. "Methods of Macroeconomic Dynamics, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262201232, April.
    4. Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996. "A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics," Journal of Economic Theory, Elsevier, vol. 68(1), pages 149-173, January.
    5. Ladron-de-Guevara, Antonio & Ortigueira, Salvador & Santos, Manuel S., 1997. "Equilibrium dynamics in two-sector models of endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 115-143, January.
    6. Nick Hanley, 2000. "Macroeconomic Measures of ‘Sustainability’," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 1-30, February.
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    More about this item

    Keywords

    Endogenous growth; Uzawa-Lucas model; Transitional dynamics; Golden rule;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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