An Experimental AK Model of Growth

2016

In this lecture, I review the theoretical origins of the empirical growth models. I begin with the Solow and AK models informed by neoclassical theory. I demonstrate that both models do not make an explicit distinction between capital accumulation and technological progress. They just lump together the physical and human capital. Then I discuss the Schumpeterian growth models with creative destruction and institutions (particularly democracy as a meta-institution). I demonstrate that the Schumpeterian models can address a wider range of questions – particularly those that cannot be addressed satisfactorily by neoclassical models. I conclude by arguing for innovations in growth modeling – particularly for innovations that involve explicit incorporation of product-market competition and non-linearities in the relationship between innovation and growth.

The Scandinavian Journal of …, 1993

This article sets out to review Lewis 1955 without making any concession to its age. It examines the fit of Lewis' analysis with the early growth model of Harrod-Domar and the later exogenous technological progress Solow-Swan model and endogenous model approaches. We find Lewis' analysis builds on and is consistent with these approaches. His analysis is different to the usual mechanistic growth analyses and less susceptible to the usual assessment of growth theory that, "its link with public policy is often very remote. It is as if a poor man collected money for his food and blew it all on alcohol" (Sen 1970, pp. 9-10).

2004

Externalities play a central role in most theories of economic growth. We argue that international externalities, in particular, are essential for explaining a number of empirical regularities about growth and development. Foremost among these is that many countries appear to share a common long run growth rate despite persistently different rates of investment in physical capital, human capital, and research. With this motivation, we construct a hybrid of some prominent growth models that have international knowledge externalities. When calibrated, the hybrid model does a surprisingly good job of generating realistic dispersion of income levels with modest barriers to technology adoption. Human capital and physical capital contribute to income differences both directly (as usual), and indirectly by boosting resources devoted to technology adoption. The model implies that most of income above subsistence is made possible by international diffusion of knowledge.

The Theory of Economic Growth: A 'Classical' …, 2003

… and Social Change. Historical Roots and …, 2006

aspect of economic growth, the technical, social, structural and institutional changes involved, the availability of an ever greater variety and quality of goods, the erosion of received patterns of consumption, of cultural styles and of social relations, and the establishment of new ones, and so forth. These themes play an important role in work of authors such as Smith and Marx. We also set aside analytical complications due to the factual intricacies of an ever more sophisticated system of the social division of labour and an ever more complex network of interdependent sectors of production.

2005

This paper presents a model of endogenous growth in which the main engine of economic development is knowledge. Using a two-sector closed economy model that comprises of a conventional goods-producing sector and a research and development sector, our model incorporates two key aspects of knowledge: technology and human capital. Steady-state equilibrium conditions show that the growth rate of per capita income hinges on the growth rate of human capital. While the growth rate of human capital has been previously shown to affect the growth of the economy in transition between steady states or balanced growth paths, this paper is the first to link the growth rate of human capital to the steady-state growth rate of productivity and output per worker. Furthermore, this result does not exhibit scale effects or policy invariance, both of which have been longstanding concerns with the predictions of endogenous growth models developed in the 1990s.

This note studies the stochastic stability of the standard AK growth model under uncertain output technology. Capital accumulation follows a stochastic linear homogenous differential equation. It's shown that exponential balanced paths, which characterize optimal trajectories in the absence of uncertainty, are not robust to uncertainty. Precisely, it's demonstrated that the economy almost surely collapses at exponential speed even though productivity is initially arbitrarily high.

2000

this paper is to explore the existence of patterns of biased technical change in economic growth.The basic tool of analysis we use is the efficiency schedule, a version of Piero Sraffa's (1961) wage-profit raterelation.The efficiency schedule for an economy in a given time period, developed in detail in the next section, isdetermined by real labor productivity and the output-capital ratio,

Economic Theory, 2006

We develop an endogenous growth model with elastic labor supply, in which agents differ in their initial endowments of physical capital. In this framework, the growth rate and the distribution of income are jointly determined. The key equilibrating variable is the equilibrium labor supply. It determines the rate of return to capital, which in turn affects both the rate of capital accumulation and the distribution of income across agents. We then examine the impact of various structural shocks on growth and distribution. We find that faster growth is associated with a more unequal, contemporaneous distribution of income, consistent with recent empirical findings.