Education, saving, tourism, imported energy, foreign good, and trade balance of a small open economy

Abstract

This paper builds an economic growth model with endogenous wealth and human capital accumulation. It analyzes interactions between domestic economic structure, foreign goods, foreign tourism, and imported energy. Education, foreign goods, foreign tourism, and imported energy are integrated into small-open growth models with wealth accumulation in a comprehensive framework. The economic structure is a synthesis of Uzawa’s two-sector growth model and Uzawa-Lucas’ two-sector growth model. The economy is composed of one capital goods sector, services sector, and education sector. The capital goods sector, service sector and households need energies, which foreign economies supply. The capital goods sector, services sector, and households use up the land. The general equilibrium model determines consumption, production, saving, education and resource distribution under given rate of interest and prices of imported energy and goods fixed in international markets. We build the model and simulates its behavior. We conduct comparative dynamic analysis to demonstrate how different exogenous changes change transitory processes and long-run structures of economic growth.