Non-Linear Dynamic Economic Structure: Infrastructure and Knowledge in a Two-Sector Growth Model
In this chapter we propose a nonlinear dynamic model to analyze interactions between knowledge, infrastructure and economic development. Our approach is developed within the framework of Uzawa’s two-sector model (Uzawa, 1961, 1962). It is well known that Uzawa’s two-sector model has one advantage over the Solow-Swan one-sector growth model, in that the Uzawa model can be used to analyze economic structure. But as knowledge and infrastructure are omitted, it is impossible to discuss how economic structure is affected by knowledge accumulation and governmental intervention in infrastructure construction. We introduce knowledge and infrastructure into the system as “public goods” in order to ascertain the conditions under which it is economically effective for a government to increase infrastructure with network and diffusion properties and to investigate how economic structural changes may take place as a result of accumulated knowledge.
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