The Uzawa–Lucas model is an economic model of endogenous growth developed by Robert Lucas, Jr., building upon initial contributions by Hirofumi Uzawa. It extends the AK model by a two-sector setup, in which physical and human capital are produced by different technologies. The model explains long-run economic growth as consequence of human capital accumulation.
Lucas approaches in a series of papers published in the 1970s were a challenge to the classic principles of Keynesian economics when he suggested an amassed version of microeconomics models and then emphasized on human capital accumulation. In his 1988 dissection, using Ramsey framework and Cobb-Douglas production function Lucas gave more attention to formal education rather than learning-by-doing. While in Solow-Swan model human capital is constant which leads to no transitional dynamics, Lucas measures total capital as the ratio of physical to human capital, not as sum.
In the original paper, Lucas described the properties of both centralized and decentralized economics evolving with balanced paths.
- ^Lucas, Robert (1988). “On the Mechanics of Economic Development”. Journal of Monetary Economics. 22 (1): 3–42. doi:10.1016/0304-3932(88)90168-7.
- ^Uzawa, Hirofumi (1965). “Optimum Technical Change in An Aggregative Model of Economic Growth”. International Economic Review. 6 (1): 18–31. doi:10.2307/2525621. JSTOR 2525621.
- ^“I like this Maple Application – The Uzawa Lucas Growth Model”. www.maplesoft.com. Retrieved 2018-12-02.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.