A Multi-Country Trade and Tourism with Endogenous Capital and Knowledge

Abstract

Background: The study models a dynamic interaction among economic growth, structural change, knowledge accumulation, international trade and tourist flows. Objective: The purpose of this study is to introduce endogenous knowledge into a multi-country growth model with trade and tourism proposed by Zhang. The study models a dynamic interaction among economic growth, structural change, knowledge accumulation, international trade and tourist flows. Methods/Approach: The model is based on Arrow’s learning by doing, the Solow one-sector growth model, the Oniki-Uzawa neoclassical trade model, and the Uzawa two-sector growth model. We first build the multi-country neoclassical growth model of endogenous knowledge with international tourism. Then we show that we can follow the motion of the J-country world economy with J+1 differential equations. Results: We simulate the motion of the three-country global economy. We carry out a comparative dynamic analysis by simulation with regard to the knowledge utilization efficiency, the efficiency of learning by doing, the propensity to save, the propensity to tour other countries, and the population. Conclusions: The global economy has a unique equilibrium.

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