Transitional Dynamics in the Uzawa-Lucas Model of Endogenous Growth
Markus Reiß and
No 2003,17, SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes
We introduce an easy way of analyzing the transitional dynamics of the Uzawa-Lucas endogenous growth model. We use the value function approach to solve both the social planner?s optimization problem and the representative agent?s optimization problem in the decentralized economy. The complexity of the Hamilton-Jacobi-Bellman equation is significantly reduced to a one-dimensional initial value problem for an ordinary differential equation. This approach allows us to find the optimal controls for the non-concave Hamiltonian in the centralized economy and to detect multiple transition paths in the decentralized economy for a large external effect, which are hidden when using the maximum principle. We simulate the global transitional dynamics towards the balanced growth path. The adjustment of the model?s state variable turns out to accelerate along the transition paths. By the asymmetry of the sectors an until now unknown feature is predicted for the adjustment in the output growth rate. Its relative speed follows a hump-shaped course: Starting from a relative scarcity in physical capital, the growth rate of output decelerates first before it starts rising again.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Working Paper: Transitional Dynamics in the Uzawa-Lucas Model of Endogenous Growth (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb373:200317
Access Statistics for this paper
More papers in SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().