(Un)anticipated Technological Change in an Endogenous Growth Model

Bruce A. Conway, Rina Rosenblatt-Wisch, Klaus Reiner Schenk-Hopp

Research output: Contribution to journalArticle

Abstract

This paper examines, numerically, the impact of a negative exogenous shock to marginal productivity (such as ecological government regulation that becomes effective at some point in time) in an endogenous finite time growth model with sluggish reallocation of human capital. The policy can be anticipated or unanticipated by the economic agents, and it can also be announced but not implemented. It turns out that these frictions have very strong long-run effects on consumption and output, and on the optimal allocation of capital and labor in particular. The qualitative properties are closely related to those found in homogenous labor models with positive productivity shocks. The numerical optimization method employed here proved very successful in qualitatively similar problems in engineering but has not yet found its way into macroeconomic models of growth.

Original languageEnglish (US)
Article number3
JournalStudies in Nonlinear Dynamics and Econometrics
Volume13
Issue number1
DOIs
StatePublished - Mar 6 2009

Keywords

  • Frictions
  • Runge-Kutta parallel-shooting algorithm
  • Technology shock
  • Two-sector endogenous growth model

ASJC Scopus subject areas

  • Analysis
  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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