Openness, Human Capital and Multiplicity of Equilibrium

Ali Benabdennour

Abstract


Inspired by Lucas model (1988), this paper develops a theoretical analysis of the long-term dynamic growth, with reference to threshold effects. Threshold effects are associated with openness and social endowment of human capital. The objective is to explain the divergence of long-term growth paths, observed for a long period, between countries and regions. The main results show that the long-term dynamic growth is characterized by a multiplicity of equilibrium. The latter is explained by the nonlinear effects of openness and social endowment of human capital on the long-term growth. The analysis concludes that the growth dynamic is defined by two dissimilar growth regimes. These Growth regimes are separated by a critical threshold associated with the complementarity between openness and the social endowment of human capital. The first regime (low equilibrium) corresponds to a trap and admits the usual configurations of exogenous growth models; the second regime (high equilibrium) admits the main characteristics of endogenous growth.



Full Text: PDF DOI: 10.5539/ijef.v5n11p124

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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