On the system-theoretical foundations of non-economic parameter constancy assumptions in economic growth modeling

Denis Stijepic

MPRA Paper from University Library of Munich, Germany

Abstract: In general, positive/quantitative growth models assume that (some of) the model parameters that are determined in non-economic systems are exogenous and constant. Such non-economic parameter constancy assumptions (abbr. ‘NEPCAs’) are not necessarily consistent with the empirical evidence on significant cross-system interactions and, in particular, long-run interactions between the economic system and the non-economic systems (e.g. socio-cultural, political, and ecological system). We derive the system-theoretical/mathematical conditions under which NEPCAs are good approximations of cross-system interactions in economic growth models: we (a) discuss the standard types of dynamic equilibrium and the problems that arise when using them to justify NEPCAs in economic long-run models (in presence of cross-system interactions), (b) formulate an equilibrium type (a ‘stable partial dynamic equilibrium’) that solves these problems, and (c) demonstrate the applicability of this equilibrium type as a foundation of the NEPCAs used in the AK growth model. Finally, we discuss some topics for further research.

Keywords: economic growth; long run; parameter conditions; cross-system interactions; economic system; socio-cultural system; political system; ecological system; dynamic systems theory; dynamic equilibrium; AK model; population growth (search for similar items in EconPapers)
JEL-codes: A12 O40 (search for similar items in EconPapers)
Date: 2017-11-14
New Economics Papers: this item is included in nep-gro
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Citations: View citations in EconPapers (2)

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