Transitional dynamics and economic growth in developing countries (Q1580395)

This book is devoted to explaning by means of mathematical modeling the following peculiarities (``stylized facts'') of economic processes in low-income (developing and underdeveloping) countries: -- a considerable diversity in the growth rates of per capita income (PCI); -- a positive correlation between the sawing rate and the level of PCI; -- the same between the growth rate and the level of PCI (\(\beta\)-divergence); -- \(\beta\)-divergence for the lower range of PCI and \(\beta\)-convergence for the upper one. The processes are regarded as transitional dynamics towards a balanced-growth equilibrium. The basic model is a linear Ramsey type dynamic of capital per capita with consumption variable that is a control one. The intertemporal consumption is bounded below by the level of subsistent consumption, which is a key restriction for the model. The object of control is maximization of an intertemporal Stone-Geary utility function which has variable elasticity substitution current consumption by future one. The first order optimality conditions of the variational problem yields an explanation of two of the stylized facts. In order to explain the others the linear model is extended by using the nonlinear Jones-Manuelli production function that yields to capture the influence of national government policy on economy. Analysis of the corresponding variational problem reduces to the closed differential equation system defining the phase (capital) and control (consumption) variables. Another way (without subsistent consumption constraints) to explain the stylized facts, used in the book, is introducing the ''productive consumption'' in the growth model via ''the gross human-capital-enhancement function'' and via the production function that depends on the capital and consumption variables. Finally, a two-stage least squares regression, based on the concept of endogenous control variables, is used for empirically analyzing of transitional processes.