Cyclically Balanced Growth Paths in a Model of Economic Growth with Endogenous Policy Switching
29 Pages Posted: 17 Nov 2015
Date Written: November 16, 2015
This paper deals with a model of economic growth, which we expand to include endogenous policy switching based on retrospective voting. It is shown that under certain conditions the solution has a special form that we call a cyclically balanced growth path. This type of solution is an analogue to balanced growth paths, which often occur in growth models with constant policies. Cyclically balanced growth paths are investigated analytically, and the growth rate over the cycle has been found. Results of numerical experiments are also provided and possible empirical applications of the model are outlined.
Keywords: differential equations; dynamical model; policy space; democracy; autocracy; economic growth; efficiency; public capital; growth path; retrospective voting
JEL Classification: C61, H54, O41
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