Posts Tagged ‘Creative Region’

INCREASING RETURNS IN A MODEL WITH CREATIVE AND PHYSICAL CAPITAL: DOES A BALANCED GROWTH PATH EXIST?

Amitrajeet A. BATABYAL

Department of Economics, Rochester Institute of Technology, 92 Lomb Memorial Drive, Rochester, NY 14623-5604, USA.
aabgsh@rit.edu

Abstract

In this note we study aspects of economic growth in a region that produces a final consumption good with creative and physical capital. This consumption good is manufactured with a production function that exhibits increasing returns to scale. Our analysis leads to three results. First, we compute the growth rate of creative capital in our regional economy. Second, we show that despite the presence of increasing returns, the regional economy under study converges to a balanced growth path (BGP). Finally, we compute the growth rates of physical capital and output on the BGP.

Keywords: Balanced Growth Path, Creative Capital, Creative Region, Economic Growth, Increasing Returns

JEL classification: R11, D20
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TRADE BETWEEN CREATIVE REGIONS WHEN THE INPUT ELASTICITY OF SUBSTITUTION IS LESS THAN UNITY

Amitrajeet A. BATABYAL

Department of Economics, Rochester Institute of Technology, 92 Lomb Memorial Drive, Rochester, NY 14623-5604, USA.
aabgsh@rit.edu

Hamid BELADI

Department of Economics, University of Texas at San Antonio, One UTSA Circle, San Antonio, TX 78249-0631, USA.
Hamid.Beladi@utsa.edu

Abstract

We analyze a model of trade between J heterogeneous regions that are creative in the sense of Richard Florida. There are two non-traded final goods that are used for consumption and investment. There is a continuum of inputs that are freely traded between the creative regions. There is no borrowing or lending between the creative regions. Specifically, we study the impacts of free trade in inputs when the elasticity of substitution between the traded inputs that are used to produce the final consumption and investment goods is less than unity. We first show that creative regions that have lower discount rates will be relatively poor and hence worse off with trade when the above elasticity of substitution is less than one. Next, we explain in detail why this negative result obtains.

Keywords: Creative Capital, Creative Region, Elasticity of Substitution, Input, Trade

JEL classification: R11, F12

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