Transitional Dynamics of an Endogenous Growth Model with an Erosion Effect

Sequeira, Tiago Neves

doi:10.2139/ssrn.999628

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Transitional Dynamics of an Endogenous Growth Model with an Erosion Effect

FEUNL Working Paper Series, No 508

18 Pages Posted: 14 Jul 2007

See all articles by Tiago Neves Sequeira

Tiago Neves Sequeira

University of the Interior of Beira - Faculty of Social Sciences and Humanities; Nova School of Business and Economics

There are 2 versions of this paper

Date Written: 2007

Abstract

The convergence features of an Endogenous Growth model with Physical capital, Human Capital and R&D have been studied. We add an erosion effect (supported by empirical evidence) to this model, and fully characterize its convergence properties. The dynamics is described by a fourth-order system of differential equations. We show that the model converges along a one-dimensional stable manifold and that its equilibrium is saddle-path stable. We also argue that one of the implications of considering this "erosion effect" is the increase in the adherence of the model to data.

Keywords: endogenous growth models, convergence, erosion effect, model fitness

JEL Classification: O11, O15, O31, O33, O41

Suggested Citation: Suggested Citation

Neves Sequeira, Tiago, Transitional Dynamics of an Endogenous Growth Model with an Erosion Effect (2007). FEUNL Working Paper Series, No 508, Available at SSRN: https://ssrn.com/abstract=999628 or http://dx.doi.org/10.2139/ssrn.999628