Dynamics of Output Growth, Consumption and Physical Capital in Two-Sector Models of Endogenous Growth

Farhad Nili

Discussion Papers from Department of Economics, University of York

Abstract: This paper considers transitional dynamics of a two-sector endogenous growth model in the Uzawa-Lucas framework. We find that when the ratio of physical to human capital is sufficiently high, it is optimal for both consumption and physical capital to fall for a finite period and then gradually rise along their transition path. The paper also shows that for high values of intertemporal elasticity of consumption, rate of growth of output is increasing in the ratio of physical to human capital, while when the elasticity is moderate or low, output growth is U-shaped.

Keywords: Endogenous growth; Uzawa-Lucas model; Transitional dynamics; Golden rule (search for similar items in EconPapers)
JEL-codes: O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:00/62

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