Hostname: page-component-8448b6f56d-42gr6 Total loading time: 0 Render date: 2024-04-19T13:38:45.911Z Has data issue: false hasContentIssue false
  • English
  • Français

THE DYNAMIC PROPERTIES OF ENDOGENOUS GROWTH MODELS

Published online by Cambridge University Press:  11 March 2013

Norman Sedgley  and
Bruce Elmslie
Norman Sedgley*
Affiliation:
Loyola University in Maryland
Bruce Elmslie
Affiliation:
University of New Hampshire
*
Address correspondence to: Norman Sedgley, Department of Economics, Sellinger School of Business and Management, Loyola University in Maryland, Baltimore, MD 21210, USA; e-mail: nsedgley@loyola.edu.
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper explores the dynamics of semiendogenous versus fully endogenous growth models in “lab equipment” specifications of the models with expanding sectors. Capital is allowed to accumulate and is used, together with other inputs, to produce new knowledge. The stability of the steady state path is found to be determined by the inequality and/or knife-edge restrictions needed to produce steady state growth. This paper takes the ratio of the shadow price of capital to knowledge and the level of consumption as jump variables. Semiendogenous growth models lead to a 4 × 4 dynamic system where the sign of the coefficient matrix of the log linearized dynamic system is indefinite, leading to a potential for both stable and unstable equilibria. The knife-edge restrictions needed to generate policy influences on growth are shown to be restrictions that reduce the system to 3 × 3 with a positive definite coefficient matrix, thereby guaranteeing a globally stable equilibrium. Implications for empirical testing are addressed.

Keywords

Endogenous GrowthDynamic PropertiesTransitional DynamicsStability
Type
Articles
Information
Macroeconomic Dynamics , Volume 17 , Issue 5 , July 2013 , pp. 1118 - 1134
Copyright
Copyright © Cambridge University Press 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Aghion, Philippe and Howitt, Peter (1992) A model of growth through creative destruction. Econometrica 60 (2), 323–351.CrossRefGoogle Scholar
Aghion, Philippe and Howitt, Peter (1998) Endogenous Growth Theory. London: MIT Press.Google Scholar
Boskin, Michael and Lau, Lawrence (2000) Generalized Solow neutral technical progress and postwar economic growth. NBER working paper 8023.CrossRefGoogle Scholar
Dalgaard, Carl-Johan and Kreiner, Claus Thustrup (2001) Is declining productivity inevitable? Journal of Economic Growth 6 (3), 187–203.CrossRefGoogle Scholar
Dinopoulos, Elias and Thompson, Peter (1998) Schumpeterian growth without scale effects. Journal of Economic Growth 3 (4), 313–335.CrossRefGoogle Scholar
Eicher, Theo and Turnovsky, Stephen (1999) Non-scale models of economic growth. Economic Journal 109 (July), 394–415.CrossRefGoogle Scholar
Eicher, Theo and Turnovsky, Stephen (2001) Transitional dynamics in a two-sector nonscale growth model. Journal of Economic Dynamics and Control 25, 85–113.CrossRefGoogle Scholar
Giordani, Paolo and Luca, Zamparelli (2008) The importance of industrial policy in quality-ladder growth models. B.E. Journal of Macroeconomics: Topics in Macroeconomics 8, 1.CrossRefGoogle Scholar
Grossman, Gene and Helpman, Elhanan (1991) Innovation and Growth in the Global Economy. Cambridge, MA: MIT Press.Google Scholar
Ha, Joonyung and Howitt, Peter (2007) Accounting for trends in productivity and R&D: A Schumpeterian critique of semi-endogenous growth theory. Journal of Money, Credit and Banking 39 (4), 733–774.CrossRefGoogle Scholar
Hall, Robert and Jones, Charles (1999) Why do some countries produce so much more output than others? Quarterly Journal of Economics 114 (1), 83–116.CrossRefGoogle Scholar
Jones, Charles (1995a) R&D based models of economic growth. Journal of Political Economy 103, 759–784.CrossRefGoogle Scholar
Jones, Charles (1995b) Time series tests of endogenous growth models. Quarterly Journal of Economics 110, 495–525.CrossRefGoogle Scholar
Jones, Charles (1999) Growth: With or without scale effects? American Economic Review Papers and Proceedings 89 (2), 139–144.CrossRefGoogle Scholar
Jones, Charles (2001) Was the industrial revolution inevitable? Economic growth over the very long run. BEP Advances in Macroeconomics 2, 1.Google Scholar
Jones, Charles (2002) Sources of US economic growth in a world of ideas. American Economic Review 92 (1), 220–239.CrossRefGoogle Scholar
Jones, Charles (2003) Population and ideas: A theory of endogenous growth. In Aghion, Philippe, Frydman, Roman, Stiglitz, Joseph, and Woodford, Michael (eds.), Knowledge, Information, and Expectations in Modern Macroeconomics: In Honor of Edmund S. Phelps. Princeton, NJ: Princeton University Press.Google Scholar
Jones, Charles and Williams, John (2000) To much of a good thing? The economics of investment in R&D. Journal of Economic Growth 5, 65–85.CrossRefGoogle Scholar
Kortum, Samuel (1997) Research, patenting, and technological change. Econometrica 65, 6, 1389–1419.CrossRefGoogle Scholar
Li, Chol-Won (2001) On the policy implications of endogenous technological progress. Economic Journal 111, 164–179.CrossRefGoogle Scholar
Madsen, Jakob (2008) Semi-endogenous versus Schumpeterian growth models: Testing the knowledge production function using international data. Journal of Economics Growth 3 (1), 1–26.CrossRefGoogle Scholar
Peretto, Pietro (1998) Technological change and population growth. Journal of Economic Growth 3 (4), 283–311.CrossRefGoogle Scholar
Romer, Paul (1990) Endogenous technological change. Journal of Political Economy 98, S71–102.CrossRefGoogle Scholar
Sedgley, Norman and Elmslie, Bruce (2010) Reinterpreting the Jones critique: A time series approach to testing and understanding idea driven growth models with transitional dynamics. Journal of Macroeconomics 32 (9), 103–17.CrossRefGoogle Scholar
Segerstrom, Paul (1998) Endogenous growth without scale effects. American Economic Review 88 (5), 1290–1310.Google Scholar
Segerstrom, Paul (2000) The long run growth effects of R&D subsidies. Journal of Economic Growth 5(September), 277–305.CrossRefGoogle Scholar
Young, Alwyn (1998) Growth without scale effects. Journal of Political Economy 106 (1), 41–63.CrossRefGoogle Scholar
Zachariadis, Marios (2003) R&D, innovation, and technological progress: A test of the Schumpeterian framework without scale effects. Canadian Journal of Economics 36 (3), 566–586.CrossRefGoogle Scholar
Zachariadis, Marios (2004) R&D-induced growth in the OECD? Review of Development Economics 8 (3), 423–439.CrossRefGoogle Scholar