Endogenous Growth Theory.Image.Marked文档.pdfVIP

Endogenous Growth Theory Motivation The Solow and Ramsey models o§er valuable insights but have important limi- tations: Di§erences in capital accummulation cannot satisfactorily account for the prevailing large di§erences in output per worker; In the steady state, the only source of growth is technological progress, which is assumed to be exogenous and whose determinants are not ex- plored. Therefore, the new growth theory developed models of endogenous growth which explicitly model the production of knowledge, or RD. Key contributions: Paul Romer (1990), Grossman and Helpman (1991), Aghion and Howitt (1992, 1998). Assumptions Two sectors: a goods-producing sector and an RD sector (production of knowl- edge). The two sectors have to share the available stocks of K (t) and L (t). Both sectors use the full stock of knowledge, A (t). Production function of the goods-producing sector is a CRTS Cobb-Douglas, using fraction 1 a of labor and 1 a of capital (a and a are exogenous L K L K and constant): Y (t) = [(1 a ) K (t)] [A (t) (1 a ) L (t)]1 K L where 0 1. Except for assuming that the production process only uses a part of the available capital and labor, this is the same as the production function used so far. Production function of the RD sector is a generalized Cobb-Douglas PF: _ A (t) = B [a K (t)] [a L (t)] A (t) K L where 0, 0 and B 0 is a shift parameter. Note that RD production is formulated in such a way that constant, dimin- ishing or increasing returns to scale to capital and labor are both possible: