Transitional Dynamics of an Endogenous Growth Model with an Erosion Effect
FEUNL Working Paper Series, No 508
18 Pages Posted: 14 Jul 2007
There are 2 versions of this paper
Transitional Dynamics of an Endogenous Growth Model with an Erosion Effect
Transitional Dynamics of an Endogenous Growth Model with an Erosion Effect
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
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