Neoclassical Model Of Economic Growth Research Articles

Method of Determining Trajectories in a Neighbourhood of Long-Run Equilibrium in Neoclassical Models of Exogenous Economic Growth

We consider economic growth models in the form of dynamical systems. We show a method of determining trajectories in a neighbourhood of a long-run equilibrium in some neoclassical models of exogenous economic growth. This method is applied primarily to these models which in general have no analytical solution. We propose the general method of finding solutions of arbitrarily dimensional dynamical system in the form of power series. We expand the state function in Taylor's series in the neighbourhood of the initial state. The coefficients of expansion represent the parameters of the variation of the state of the system and are calculated algebraically in Mathematica. We present the method of finding solutions for the Solow-Swan model and the Mankiw-Romer-Weil model. We use also the Padé aproximant method to obtain a better convergence of the power series. This method allows to obtain a solution in the form of a series for trajectories in a neighbourhood of a long-run equilibrium in two models of exogenous economic growth. We show that obtained solutions are a good approximation of time paths, along which the long-run equilibrium is reached. We show a possibility of estimation of model parameters for which solutions in the form of series are known.

The Human Resources: Its Contribution to Economic Development in Indonesia

Economic growth can be used as a measure of development that reflects the welfare of society in a country. The source of economic growth used in this study uses a production factors approach, namely capital, human resources, and technology. Human resources make the biggest contribution compared to capital production factors and technology towards Indonesia's economic growth. This study aims to determine the magnitude of the contribution of human resources to Indonesia's economic growth. To measure the magnitude of the contribution of each production factor to Indonesia's economic growth, the Neo Classical economic growth model was used as proposed by Abramovit and R.M. Solow using the Cobb Douglas production function that has been changed in a multiple regression equation: Log Yy = log a + α log C + β log L. The type of data used is secondary data in the time seies regarding the devolopment of the laborforce, investment namely domestict and foreign investment, and gross domestict product, from 2004-2016. The data used in this research is data on the development laborforce of Indonesian originating from world bank, domestic investment and planting foreign capital comes from the world bank and the finance ministry of the Republic of Indonesia, Gross Domestic Product sourced from the world bank. To the determine the magnitude of the influence of the production fctors of human resource and capital on Indonesia economic growth, it was processed using SPSS.20 program. Further more, to measure the contribution of each production factor to Indonesia economic growth, the Alfian Lains formula was used with the Dession method as follows: Cr Xi = . The results of this study indicate that in Indonesia there is a strong influence between the factors of human resources and capital on GDP, while the factors of technology production are negative. Based on the Neo Classical flow, investment and human resource factors make a biggest contribution to Indonesia's economic growth, while the contribution of technological progress is low. Technological developments in Indonesia still lag behind compared to India, Singapore, Malaysia, Thailand and the Philippines. The factor of human resource production provides the biggest contribution to Indonesia's economic growth. However, human resource in Indonesia is dominated by an unskilled human resource category of 73.12 percent, while the remaining 26.88 percent is classified as skilled human resources, it causes GDP of Indonesia is low. The results of the study show that the factors of production of human resources and capital have a positive influence on Indonesia's economic growth of 96.30 percent. The value of labor elasticity to GDP is 7.755, which means that if there is an increase in energy productivity by 10 percent, then economic growth will increase by 77.55 percent. For capital production factors, with an elasticity value of 0.041, there is only economic growth of 4.10 percent, if there is an increase in capital productivity by 10 percent. Whereas, for the factor of technology production is the result of a reduction between national income and the factor of labor production after being added to capital which is equal to 1.64 percent. Therefore, it is recommended that the Indonesian government must improve the quality of human resources through improvements in the education sector.

Accuracy of policy function approximations for strongly concave recursive problems

AbstractUnder the hypotheses of strong concavity of the aggregator function and concavity of the stochastic operator which define the objective function of the stochastic dynamic programming problem (SDPP), we prove that the policy function approximation of the problem is a Hölder continuous function with respect to the value function approximation. From this, explicit error bounds for computation of the solution of such problems are provided. To illustrate the results we apply the error control formula to the solution of two SDPPs with aggregator functions: the neoclassical Ramsey economic growth model and the Lucas asset pricing model.

Parametric Analysis of the Sensitivity of a Functional on the Basis of the Non-Classical Model of Optimal Economic Growth

We study the sensitivity of a functional on the basis of the macroeconomic model. This analysis is a calculation of the derivative with respect to the parameters of the functional characterizing the optimal trajectory. To solve this problem, we apply an approach using conjugate functions and bring the results down to concrete computations. As the model we use a neoclassical model of optimal economic growth and estimate the sensitivity with the growth rate of civilian labor force of national economies in three European countries. Our results can be recommended for analysis and practical use by the relevant authorities. Since the ultimate goal of modeling is to consider feasible alternatives when making decisions, such analysis can be useful.

On the stability properties of a delay differential neoclassical model of economic growth

The research of Sebastian Buedo-Fernandez has been partially supported by Ministerio de Educacion, Cultura y Deporte of Spain (grant FPU16/04416), Xunta de Galicia and European Community fund FEDER (grants ED481A-2017/030, GRC2015/004, R2016/022), and AEI of Spain (grant MTM2016-75140-P). Eduardo Liz acknowledges the support of the research grant MTM2017–85054–C2–1–P (AEI/FEDER, UE)

Influence of Foreign Economic Activity on the Economic Growth of Russian Regions

A study of the influence of foreign trade on economic growth is one of controversial research issues. The economy of Russia is based on close interactions with foreign markets, which are sources of its growth. Russia has a large number of regional economies, which are disproportionately connected with foreign markets. The regional specificity may correct significantly a contribution of foreign trade interactions to the economic growth of Russia. The existing research of the influence of foreign trade on the economic growth of Russian regions are episodic and outdated. The main purpose of the article is to assess the long-term impact of foreign trade on the economic growth of Russian regions in a decade (2007–2016). The methodology of the research is based on the neoclassical model of economic growth expanded by adding the parameters of the foreign trade interactions estimated by regions in stable and current prices. The hypothesis of a long-term positive impact of exports and imports on the Russian regions’ economic growth for all model specifications was confirmed. The consideration of regional specificity has given a more exact assessment of the cumulative contribution of regions to economic growth if the foreign trade relations are compared with the aggregated models. We have revealed that indicators of foreign trade, in general, made a positive contribution to economic growth, compensating negative impact of other factors. The paper shows the dependence of the dynamics of regional economic growth on the current volatility of export and import. We suppose that the generally positive impact of foreign trade on economic growth is corrected by regions, in which production and consumption are subsidized within the existing budgetary process. The tendency of the positive influence of export on economic growth is underestimated due to the regions delivering their production mostly to the domestic market. The tendency of the positive influence of import on economic growth is underestimated due to the regions where there are no largest logistic centres and no interaction with foreign countries. These estimates can be a confirmation of the need to intensify the policy of trade openness with the purpose of accelerating the Russian regional economy.

Bernoulli substitution in the Ramsey model: Optimal trajectories under control constraints

We consider a neoclassical (economic) growth model. A nonlinear Ramsey equation, modeling capital dynamics, in the case of Cobb-Douglas production function is reduced to the linear differential equation via a Bernoulli substitution. This considerably facilitates the search for a solution to the optimal growth problem with logarithmic preferences. The study deals with solving the corresponding infinite horizon optimal control problem. We consider a vector field of the Hamiltonian system in the Pontryagin maximum principle, taking into account control constraints. We prove the existence of two alternative steady states, depending on the constraints. A proposed algorithm for constructing growth trajectories combines methods of open-loop control and closed-loop regulatory control. For some levels of constraints and initial conditions, a closed-form solution is obtained. We also demonstrate the impact of technological change on the economic equilibrium dynamics. Results are supported by computer calculations.

The Neoclassical Growth Model with Sinusoidal Investments

The aim of the present study is an attempt to extend the neoclassical model of economic growth of Solow by repealing the assumption of fixed investment and introducing an investment function dependent sinusoidally on the time. The adoption of the sinusoidal function of investment is substantiated by the fact that investments (like manufacturing) are largely depended on the economic situation, which is subject to periodic fluctuations. The authors introduce the theoretical considerations on the notion of cyclical and smooth path of temporal capital-labour ratio and labour productivity. When using these tools the authors identified, by calculating the relative deviations of the mentioned path, the impact of investment function dependent sinusoidally on the time.In the empirical analysis the authors conducted the calibration of parameters used by the research model. Based on panel data for the EU15 between the years 2000–2013 the α parameter (production flexibility in relation to capital) was estimated first at 0,349. That value was adopted to further numerical analysis. In the second stage the simulations of numerical, calibrated deviations of temporal cyclical path of capital-labour ratio (labor productivity) from the smooth path of capital-labour ratio (labor productivity) was performed. When conducting numerical analysis the impact of different investment rates (15%, 20%, 25%) and periods of cyclical fluctuations (4 or 10 years) have been considered in relation to the formation of these deviations. Numerical analysis for the economies of the EU15 group was made for one hundred time series.

Exploring the effect of including the environment in the neoclassical growth model

This study begins with a brief presentation of the Neoclassical Model of economic growth and continues with the inclusion of two additional variables that affect welfare in opposing ways: pollution and abatement expenditures. The optimal steady-state conditions are derived allowing for a preliminary comparison of the resulting balanced growth paths under the criterion of welfare maximization with and without environmental externalities. Finally, using a balanced panel data of 43 countries and for the time period 1990–2011 we test the validity of including the environment in the neoclassical growth model approximating pollution abatement with the electricity production from renewable sources and pollution with carbon dioxide emissions. With the help of adequate econometric panel data methods we test the validity of the environmental Kuznets curve hypothesis for the full sample, as well as for the OECD and non-OECD countries.

The Role of Foreign Direct Investment on Income Convergence in China after Early 1990s from a Spatial Econometric Perspective

AbstractThis paper introduces foreign direct investment (FDI) as an endogenous variable based on a neoclassical model of economic growth and investigates the impact of FDI on income convergence in China using provincial panel data from 1991 to 2007. A spatial model is later exploited to further examine the effect of FDI on convergence in China in light of remarkable and positive spatial correlations among neighboring regions. Results of estimates confirm the role of FDI inflow as a significant driving force to promote conditional convergence in China after the early 1990s. They also confirm that the non‐spatial classical model underestimates the impact of FDI on regional economic growth and also underestimates the speed of convergence.

DYNAMICS OF GROWTH, POVERTY AND HUMAN CAPITAL: EVIDENCE FROM INDONESIAN SUB-NATIONAL DATA

The aim of this study is twofold. First, despite the vast empirical literature on testing the neoclassical model of economic growth using cross-country data, very few studies exist at the sub-national level. We attempt to fill this gap by utilizing panel data over the 2002-2012 period, a modified neoclassical growth equation, and a dynamic panel estimator to investigate the effect of both health and education capital on economic growth and poverty at the district level in Indonesia. Secondly, whilst most existing cross-country studies tend to concentrate only on education as a measure of human capital, we expand the analysis and probe the effects of health capital as well. As far as we are aware, no study has done a direct and comprehensive examination of the impacts of health on growth and poverty at the sub-national level. Thus this study is a premier at the sub-national level, and our findings will be particularly relevant in understanding the role of both health and education capital in accelerating growth and poverty reduction efforts.

Path Dependence in Neoclassical Economic Growth Theory

technical solutions. The analysis of historical conditions is almost entirely carried out with the use of qualitative methods, since the subject of the research is non-formalized. In addition, the theoretical basis for conducting relevant empirical research is still missing. As a result of the development of complexity economics in recent years, numerous dynamic features of complex economic systems can be examined with the application of quantitative methods which, in eect, strengthens the bonds between theory and practice. Rare exceptions include path dependence relations. The aim of this article is to fill this gap and to create a theoretical basis for quantitative research on historical conditions in economics. This is a necessary condition for undertaking empirical research. The theoretical search started with the Keynesian model of the Samuelson‐Hicks trade cycle, to demonstrate that conventional economics completely omits the most interesting path-dependence cases. It turns out that only the neoclassical model of economic growth, taking into account two power laws, provides appropriate dynamic characteristics for a full description of path dependence relations. Therefore, appropriate theoretical bases can be provided only by complexity economics. It may seem that, in this work, the dependence on history is restricted to two successive time steps in the case of the Samuelson‐Hicks model and a single step in the neoclassical model of economic growth by Day. However, it examines an ordered path dependence, where events are chronologically ordered and the impact of earlier events on the later ones occurs through intermediary events. It should be remembered that events are constantly aected by environmental stimuli that are reflected not only in initial conditions, but also in the values of the parameters for all periods. Thus, it is not a case of short-term memory.

Optimal investment with a nonlinear amortization function in economic growth

Some neoclassical model of economic growth is considered, and the conditions are found of attainability and optimal management of the investments for this model. Here the production function and the amortization expenses depend nonlinearly on capital and labor. The existence and uniqueness theorems are proved for the optimal investment in economy, as well as the theorem of attainability of a given economic level.

Fiscal Policy, Supply Shocks and Economic Expansion in Brazil from 2003 to 2007*

This article has two objectives. The first is to show the impact of distortionary taxes during a period of the economic cycle in Brazil. The second is to show that an explanation for output to grow slower than productivity is the increase in taxes on productive factors: capital and labor. To attain these two objectives, we carried out a study comparing the Brazilian economy with simulated data from the neoclassical model of economic growth with and without distortionary taxes. The empirical results show that the model without taxes predicts stronger growth than observed between 2003 and 2007. This point was addressed using the neoclassical growth model with distortionary taxes. However, this model produces a lower output path than observed. Besides this, both models fail to appropriately account for the behavior of the labor market.

On necessary optimality conditions for infinite-horizon economic growth problems with locally unbounded instantaneous utility function

We consider a class of infinite-horizon optimal control problems that arise in studying models of optimal dynamic allocation of economic resources. In a typical problem of that kind the initial state is fixed, no constraints are imposed on the behavior of the admissible trajectories at infinity, and the objective functional is given by a discounted improper integral. Earlier, for such problems, S.M. Aseev and A.V. Kryazhimskiy in 2004–2007 and jointly with the author in 2012 developed a method of finite-horizon approximations and obtained variants of the Pontryagin maximum principle that guarantee normality of the problem and contain an explicit formula for the adjoint variable. In the present paper those results are extended to a more general situation where the instantaneous utility function need not be locally bounded from below. As an important illustrative example, we carry out a rigorous mathematical investigation of the transitional dynamics in the neoclassical model of optimal economic growth.

The Ramsey Model in Discrete Time and Decreasing Population Growth Rate

This paper reformulates the neoclassical Solow model of economic growth in discrete time by introducing a generic population growth law that verifies the following properties: 1) population is strictly increasing and bounded; 2) the rate of growth of population is decreasing to zero as time tends to infinity. We show that in the long run the capital per worker of the model converges to the non-trivial steady state of the Solow-Swan model with zero labor growth rate. In addition we prove that the solutions of the model are asymptotically stable.

Optimal control of allocation of resources and the economic growth in HIV‐infected communities

SUMMARYThe neoclassical model of economic growth is used to model the economic growth of a HIV‐infected community with efforts in controlling the epidemic. An optimal control model with pure‐state constraints is formulated and investigated. It is found that reduction of prevalence for the disease and economic growth agrees in a positive sense in the communities with high rate of population growth and low income. Moreover, the same control strategy will decrease the prevalence even if the capital is not growing for the case of high income communities. However, a disease control strategy with economic growth as its objective will not result in decrease in prevalence if the rate of population growth of the community is very low. Therefore, if the rate of the population growth of a community is nearly the replacement level, then the utility function for the selection of disease control strategies should not be an economic benefit. Copyright © 2013 John Wiley & Sons, Ltd.

The impact of Gyeongbu High Speed Rail construction on regional economic growth

The Gyeongbu High Speed Rail (KTX) was constructed with the aim to improve people’s quality of life and for the growth of regional economies. However, contrary to expectations, there are discussions of economy being focused on metropolitan areas due to the Straw Effect. In this paper, the influence of large-scaled land development projects on local economy was analyzed through the case of KTX project. For this purpose, an empirical analysis model, which utilizes neoclassical model of economic growth and the panel data of 16 cities and provinces from 1999 to 2008 was used to make the analysis through the generalized least square method. As a result, the developed neoclassical model of economic growth proved to be useful in explaining local economic growth in Korea, and large-scale land development projects such as the KTX was found to cause negative effects on local economic growth. From this, it seems problematic to assume the construction of High Speed Rail (hereafter HSR) to be beneficial to the economy of the corresponding regions. The results should prove to be an important resource for policies regarding more efficient and balanced land development projects in the future.

Externalities, Transport Networks and the Economic Growth of Urban Clusters

This article uses network analysis tools and new economic geography theory to modify the neo-classical model of regional economic growth, establishes an economic growth model of urban clusters based on externalities and transport networks through a differentiation of transaction costs, and uses the 1990-2008 data of some Chinese cities and the VAR model to test the model. Our empirical study shows that under the influence of transport networks, central cities rely on factor agglomeration for growth, while peripheral cities catch up quickly; that improved transport networks expedite the factor agglomeration of central cities; and that when some newly-added factors are reserved, increasing the node clustering coefficient and reducing peripheral cities’ transport costs will promote these cities’ application of externalities, expedite their economic growth, and facilitate the coordinated growth of central and peripheral cities. Therefore, in building the transport infrastructure, equal emphasis should be placed on linking central cities with peripheral ones and on linking peripheral cities with each other.

Forecasting the Convergence State of per Capital Income in Vietnam

Convergence problem of an economic variable represents an underlying forecast of neoclassical economic growth model. This paper aims to analyze the convergence of provincial per capita GDP stability in Vietnam over the period of 1991-2007. This can be done by two approaches including bias data-based regression method for testing convergence and Markov chain model for describing features of long-term tendency of per capita income in Vietnam growth in provinces. The regression method results in the signs of convergence. To apply Markov process, we divide total pattern into 5 per capita income classes. Result estimated from the Markov chain model shows the poor convergence.