A Two-region Growth Model with Capital and Knowledge

Abstract

The previous chapter developed models with knowledge and human capital fixed. This chapter treats knowledge as endogenous variables of regional economic evolution. Knowledge creation and utilization is the driving force of modern economic development. A main issue in economics is concerned with dynamic interactions between economic growth, knowledge creation and utilization. The complexity of economic dynamics with endogenous knowledge has recently caused great attention among economists. Although many growth models with endogenous knowledge have been proposed, most of those models are either concerned with national growth or international trades. There are only a few dynamic models which are constructed to address issues related to regional development with endogenous knowledge.