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http://eprints.org/relation/isVersionOf https://pure.iiasa.ac.at/id/document/4884 http://eprints.org/relation/isVolatileVersionOf https://pure.iiasa.ac.at/id/document/4884 http://eprints.org/relation/isCoversheetVersionOf https://pure.iiasa.ac.at/id/document/4884 archive 351 disk0/00/00/67/69 2016-01-15 02:14:54 2021-08-27 17:17:59 2016-01-15 02:14:54 monograph show 2 Aseev S.M. 6509 Hutschenreiter G. 7493 Kryazhimskiy A.V. 1514 pub iis_ecn iis_mod iis_sys prog_dyn We provide steps towards a welfare analysis of a two-country endogenous growth model where a relatively small follower absorbs part of the knowledge generated in the leading country. To solve a suitably defined dynamic optimization problem an appropriate version of the Pontryagin maximum principle is developed. The properties of optimal controls and the corresponding optimal trajectories are characterized by the qualitative analysis of the solutions of the Hamiltonian system arising through the implementation of the Pontryagin maximum principle. We find that for a quite small follower, optimization produces the same asymptotic rate of innovation as the market. However, relative knowledge stocks and levels of productivity differ, in general. Thus, policy intervention has no effect on growth rates but may also affect these relative levels. The results are different for not so small follower economies. The present paper provides the rigorous justification for the results presented in Aseev, Hutschenreiter and Kryazhimskii, 2002. 2002-03 published IR-02-016 IR-02-016 19 1336 1393 public interim_report IIASA, Laxenburg, Austria 48 FALSE info:eu-repo/semantics/book