Transitional dynamics in a two-sector non-scale growth model

This paper shows how, under plausible conditions, the transitional dynamics in a two-sector R&D-based non-scale growth model are represented by a two- dimensional stable saddlepath, thus enriching the transitional adjustment p aths relative to that of the standard two-sector endogenous growth model. T he transition speed itself is variable both through time and across sectors . Capital and knowledge grow at very different rates, consistent with the e mpirical evidence. Numerical simulations are used to characterize the trans ition paths in response to a range of specific shocks. In some cases, capit al or knowledge may overshoot their respective long-run responses, during t he transitional dynamics. (C) 2001 Elsevier Science B.V. All rights reserve d.