Flexible Transitional Dynamics in a Non-Scale Fully Endogenous Growth Model

Pedro Gil, André Almeida, () and Sofia B.S.D. Castro, ()
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André Almeida,: University of Porto, Faculty of Economics
Sofia B.S.D. Castro,: University of Porto, Faculty of Economics, and CMUP

CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: This paper develops a non-scale growth model of physical capital accumulation and two types of lab-equipment R&D, where both the intensive and extensive margins of growth are fully endogenous. We study analytically the long-run equilibrium stability and transitional dynamics properties of the model, and establish meaningful sufficient conditions for saddle-path stability. We relate the different combinations of initial conditions of the dynamical system with the observation of monotonic versus non-monotonic transitional dynamics. Our model is able to predict monotonic, hump-shaped and inverted hump-shaped trajectories, therefore encompassing the evidence reported by the empirical literature for distinct subsets of countries.

Keywords: Keywords: endogenous growth; non-monotonic transitional dynamics; R&D; lab equipment; physical capital (search for similar items in EconPapers)
JEL-codes: O31 O41 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2015-06
New Economics Papers: this item is included in nep-fdg and nep-gro
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