Do Ak models really lack transitional dynamics?
Getachew, Yoseph Yilma (2012). Do Ak models really lack transitional dynamics?. UNU-MERIT.
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Author Getachew, Yoseph Yilma Title Do Ak models really lack transitional dynamics? Publication Date 2012 Publisher UNU-MERIT Abstract Contrary to a popular belief, the most popular Ak growth models display transitional dynamics once the representative agent and complete markets as- sumptions are overturned. The class of models is identi.ed with diminishing- returns at individual but constant-returns at aggregate due to externality e¤ects. Under incomplete markets, the former implies that dynasties with a lower levels of initial capital grow faster. This is picked up by the aggregate economy that passes through a long transitional period before it converges to its balanced growth path. During the transition period, aggregate con- sumption and output grow at the same rate but higher than that of capital. Keyword Transitional dynamics
Ak model
Inequality dynamics
Heterogeneous households
Incomplete capital marketJEL D3
E
O4Copyright Holder UNU-MERIT Copyright Year 2012 -
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