Social Stability and Equilibrium

Itzhak Gilboa and Akihiko Matsui

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Abstract: This paper constructs a two-country (Home and Foreign) general equilibrium model of Schumpeterian growth without scale effects. The scale effects property is removed by introducing two distinct specifications in the knowledge production function: the permanent effect on growth (PEG) specification, which allows policy effects on long-run growth; and the temporary effects on growth (TEG) specification, which generates semi-endogenous long-run economic growth. In the present model, the direction of the effect of the size of innovations on the pattern of trade and Home's relative wage depends on the way in which the scale effects property is removed. Under the PEG specification, changes in the size of innovations increase Home's comparative advantage and its relative wage, while under the TEG specification, an increase in the size of innovations increases Home's relative wage but with an ambiguous effect on its comparative advantage.

Keywords: Social Stability; Equilibrium (search for similar items in EconPapers)
Date: 1991-05
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Citations: View citations in EconPapers (175)

Published in Econometrica, 1991, Vol. 59, n° 3, pp. 859-867

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Working Paper: Social Stability and Equilibrium (2010)
Journal Article: Social Stability and Equilibrium (1991)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00753235

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