A Localization of Solow Growth Model with Labor Growth Pattern in China

Wang Wanxin, Guo Zequn

Department of Automation, Tsinghua University, Beijing, China.
Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China.

DOI: 10.4236/ti.2013.41B005                

Abstract

This paper investigates the Solow Growth Model on a country-specific level by applying the demographic growth pat-tern in China to it. To localize the neoclassic model, China population growth estimation function based on the Verhulst Population Model is introduced to transform the population growth rate from a constant to a function, altering the orig-inal model assumption. By inserting the population growth function into Solow's work, an economy growth phase dia-gram for China is obtained. MATLAB programming is used to depict the diagram in a three-dimensional space and to show that the set of optimal capital-labor ratio values lies in the intersecting line of two planes rather than in the inter-secting point of two curves in the original model setting. An neoclassical aggregate feasible growth path for China's economy can be depicted based on a chosen optimal value. The dynamic equilibrium in this case should not be unique; instead, capital-labor ratio together with population growth situation at a certain time point should be jointly taken into consideration to solve the optimization problem in the country's long term economy development.

 

Keywords

Solow Growth Model; China Population Growth; Optimal Economy Development

Conflicts of Interest

The authors declare no conflicts of interest.

References

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