Global Knowledge and Wealth with National Human Capital and Free Trade

Abstract

This paper deals with issues of global economic growth with endogenous private wealth,national human capital, and global knowledge. We build a multi-country growth model withinteractions between wealth accumulation, human capital change, and knowledge growth byintegrating the basic economic mechanisms in a few theories. The model is framed withinneoclassical growth theory. Human capital accumulation is based on the Uzawa-Lucas twosectormodel. Trade pattern is determined as in the Oniki-Uzawa trade model. Knowledgegrowth is influenced by new growth theory. Household behavior is modelled using Zhang’sconcept of disposable income and utility function. The dynamics of the J-country worldeconomy is described by 2J+1 differential equations for wealth, human capital, and knowledge.We simulate the movement of the global economy based on three economies. We alsoconduct comparative dynamic analysis to show how changes in national characteristics, suchas propensity to save, propensity to receive education, efficiency of applying human capitaland creativity, shift dynamic paths of the global and domestic economic development.