Economic Growth and Macroeconomic Dynamics: Recent by Steve Dowrick

By Steve Dowrick

This e-book brings jointly contributions in development idea and macroeconomic dynamics that mirror more moderen advancements within the ongoing debate over the relative advantages of neoclassical and endogenous development versions. It specializes in 3 vital parts which have been receiving expanding cognizance: theoretical facets, numerical and statistical elements, and overseas matters.

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Extra resources for Economic Growth and Macroeconomic Dynamics: Recent Developments in Economic Theory

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III One interesting implication of these processes is that in some circumstances a rise in the saving ratio can achieve a permanently higher rate of growth of income. ”8 However, he had not examined the possibility of the labor elasticity becoming zero and, thus, had not allowed for cases such as Figures 2(a) and 2(d). 9 As we have seen, when substitution is difficult and a golden age is not possible, income will aways grow at a rate less than the golden age growth rate. An appropriate rise in the saving ratio (provided this can be achieved) will make a golden age possible so that income can eventually grow at the same rate as labor.

K k Hence, under the assumption that ρ − Aα > 0, (37) it is clear that the consumption/capital ratio is a positive constant: A(1 − α) − A+ ρ ρ − Aα c = A− g = = > 0. k 1−α 1−α The transversality condition is satisfied: lim e−ρt ψ(t)k(t) = lim e−ρt ψ(0)e(ρ−A)t k(0)e gt t→∞ t→∞ = lim ψ(0)k(0)e−(A−g)t = 0. t→∞ The optimal initial consumption is, from Equation (38), c∗ (0) = (A− g)k0 > 0, and c∗ (t) = c∗ (0)e gt = (A− g)k0 e gt . (38) 34 Ngo Van Long and Koji Shimomura The integral of discounted utility is ∞ 1+θ α [(A− g)k0 e gt ] e−ρt dt α 0 ∞ 1+θ e−(ρ−gα)t .

K(t) In a competitive equilibrium, the rental rate is given by R(t) = f (k(t)) and the wage rate is W(t) = f (k(t)) − k(t) f (k(t)). The rate of interest is equal to the rental rate minus the rate of depreciation: r (t) = R(t) − δ. Individuals have perfect knowledge of the time paths of future factor prices and per capita capital stock. Individual i seeks to maximize the 24 Ngo Van Long and Koji Shimomura integral of the discounted utility flow: ∞ max ci (t) ki (t) k(t) u(ci (t)) + θv 0 e−ρt dt, (1) where ρ > 0 is the utility-discount rate.

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