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Transitional Dynamics in an Endogenous Growth Model with Heterogeneous Consumption Goods

Jaime Alonso-Carrera (), Jordi Caballe () and Xavier Raurich ()

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: We analyze the transitional dynamics of an endogenous growth model with heterogeneous consumption goods. In this model, convergence is driven by two different forces: the diminishing returns to capital and the growth of the relative price between physical and human capital. Because this second force arises only when heterogenous consumption goods are introduced, the transitional dynamics in this model exhibits two interesting differences with respect to the transitional dynamics in the standard two-sector growth model with a unique consumption good. First, the initial growth effect of a shock in one of the capital stocks may be the opposite to the one obtained in a model with a unique consumption good. Second, the consumption growth rate exhibits a non-monotonic behavior along the transition when the two forces have opposite growth effects.

Keywords: endogenous growth; consumption growth; transitional dynamics (search for similar items in EconPapers)
JEL-codes: O41 O47 (search for similar items in EconPapers)
Pages: 27 Pages
Date: 2009-06
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