Stability in a Three-Sector Dynamic Growth Model with Endogenous Labor Supply

Loretti Dobrescu, Mihaela Mihaela Neamtu () and Dumitru Opris ()
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Mihaela Mihaela Neamtu: Department of Economic Informatics and Statistics, West University of Timisoara
Dumitru Opris: Department of Applied Mathematics, West University of Timisoara

No 2012-10, Discussion Papers from School of Economics, The University of New South Wales

Abstract: This paper explores the stability of the stationary state for a dynamic growth model with wealth and human capital accumulation. Knowledge is created through research and learning-by-doing, while the time allocation between labor and leisure is endogenized. We analyze the model in both its deterministic and stochastic versions. First, we describe the deterministic model and analyze the stationary state. Second, using the stationary state, we defi…ne the stochastic perturbation and study the mean and squared mean values of the system states for the linearized model. Third, we prove that for certain parameters, the stationary state is asymptotically stable both in the deterministic and the stochastic model. Finally, we perform the comparative dynamic analysis for the propensities to save and to enjoy leisure, the tax rates used to finance research, and the knowledge utilization efficiency.

Keywords: labor; human capital; capital accumulation; economic growth. (search for similar items in EconPapers)
JEL-codes: C62 E22 O41 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2011-10
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