Basic Stochastic Dynamic Systems of Growth and Trade

Bjarne S. Jensen ()
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Bjarne S. Jensen: University of Southern Denmark (SDU)

Chapter Chapter 27 in The Elements and Dynamic Systems of Economic Growth and Trade Models, 2025, pp 965-998 from Springer

Abstract: Abstract Uncertainties are intrinsic features of dynamic economic systems, and this chapter considers the dynamic implications of factor endowment (labor, capital) uncertainties for a small growing trading economy. Our stochastic growth models extend the open neoclassical two-sector growth model to a stochastic environment in continuous time and extend the diffusion dynamics of one-sector growth models to a trading two-sector economy. We demonstrate that the basic propositions of deterministic steady-state growth and endogenous growth theory, under some specifications and certain parametric restrictions, are preserved within a stochastic framework.

Keywords: Stochastic elements in dynamic systems of trading economies; Implications of uncertainties in factor endowments and saving rate; Boundary conditions; Ito’s Lemma; Propositions on steady-state distributions of capital-labor ratio (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-52493-6_27

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DOI: 10.1007/978-3-031-52493-6_27

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