Template-type: ReDIF-Paper 1.0
Author-Name: Getachew, Yoseph Yilma
Author-Email: yoseph.getachew@durham.ac.uk 
Author-Workplace-Name: Durham Business School, Durham University
Title: Do Ak models really lack transitional dynamics?
Abstract: Contrary to a popular belief, the most popular Ak growth models display 
	 transitional dynamics once the representative agent and complete markets 
	 assumptions are overturned. The class of models is identied with 
	 diminishing returns at individual but constant returns at aggregate due 
	 to externality effects. Under incomplete markets, the former implies that 
	 dynasties with a lower levels of initial capital grow faster. This is 
	 picked up by the aggregate economy that passes through a long 
	 transitional period before it converges to its balanced growth path. 
	 During the transition period, aggregate consumption and output grow at 
	 the same rate but higher than that of capital.
Classification-JEL: D30, E47, O42
Keywords: Transitional dynamics, Ak model, inequality dynamics, heterogeneous households,
	 incomplete capital market
Series: UNU-MERIT Working Papers
Creation-Date: 2012
Number: 011
File-URL: http://www.merit.unu.edu/publications/wppdf/2012/wp2012-011.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2012011