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Saving Rates, Trade, Technology, and Stochastic Dynamics
Author(s) -
Jensen Bjarne S.,
Richter Martin,
Wang Chunyan,
Alsholm Preben K.
Publication year - 2001
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00117
Subject(s) - economics , endowment , small open economy , econometrics , investment (military) , factor endowment , sample (material) , endogenous growth theory , microeconomics , macroeconomics , international trade , comparative advantage , monetary policy , human capital , philosophy , chemistry , epistemology , chromatography , politics , political science , law , economic growth
This paper develops a framework for analyzing the stochastic dynamics of small growing trading economies with CES sector technologies. The open neoclassical two‐sector growth model with a diffusion process (uncertainty) for the aggregate saving/investment ratio is demonstrated with sample paths and long‐run probability distributions of the overall factor endowment ratio. Stochastic endogenous growth and cycles require a combination of fundamental growth parameter values: saving rates, terms of trade, and sectorial substitution elasticities.