Creator: Rivera-Batiz, Luis. and Romer, Paul Michael, 1955- Series: Modeling North American economic integration Abstract:
In a world with two similar, developed economies, economic integration can cause a permanent increase in the worldwide rate of growth. Starting from a position of isolations, closer integration can be achieved by increasing trade in goods or by increasing flows of ideas. We consider two models with different specifications of the research and development sector that is the source of growth. Either form of integration can increase the long-run rate of growth if it encourages the worldwide exploitation of increasing returns to scale in the research and development sector.
Subject (JEL): F43 - Economic Growth of Open Economies, O41 - One, Two, and Multisector Growth Models, and F15 - Economic Integration
Creator: Kehoe, Timothy Jerome, 1953-, Levine, David K., and Romer, Paul Michael, 1955- Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 400 Abstract:
We consider a production economy with a finite number of heterogeneous, infinitely lived consumers. We show that, if the economy is smooth enough, equilibria are locally unique for almost all endowments. We do so by converting the infinite dimensional fixed point problem stated in terms of prices and commodities into a finite dimensional Negishi problem involving individual weights in a social value function. By adding a set of artificial fixed factors to utility and production functions, we can write the equilibrium conditions equating spending and income for each consumer entirely in terms of time zero factor endowments and derivatives of the social value function.
Keyword: Dynamic model, Equilibrium, and Consumer Subject (JEL): C62 - Existence and Stability Conditions of Equilibrium