A stylized version of the Aghion-Howitt growth model

Delano S. Villanueva

Abstract


This short note introduces a compact, self-contained 3 × 3 reduced version of the Aghion-Howitt (AH, Schumpeterian, or creative destruction) model. This stylized reduction aims to capture the three core mechanisms in the AH intuition: (i) innovation (endogenous technological progress), (ii) capital accumulation or production, and (iii) allocation of labor to research & development (R&D) which responds to relative returns. This piece writes the three-equation system, explains every symbol, and outlines the steady-state or balanced-growth conditions as well as the Jacobian for local stability analysis. Developing and emerging economies such as the Philippines, where the R&D sector is actively growing, can benefit from understanding the AH model.

JEL classification: E27, O31, O410


Keywords


Aghion–Howitt model, endogenous growth, creative destruction, research and development, emerging economies

Full Text:

PDF

Refbacks

  • There are currently no refbacks.