Modeling and Identification of Two-Sector Growth Economic Models

Abstract

In this paper we consider the development ; simulation and identification of a two-sector growth economic model. The sectors of production are ca-pital and consumer goods with constant returns to scale production functions. The market conditions are those of perfect competition. Full employment and full utilization of the factors of production are also assumed. With savings, technological change, and capital depreciation as control parameters, the model presents an interesting vehicle for the simulation of economic systems and the identification of related parameters and production functions on the basis of past data on capital and consumer goods production.

Indeed, utilizing realistic values of savings and other control parameters the system is simulated and the parameters are identified by means of the simulated data in the presence of imposed realistic disturbances. The identification procedure is actually based on non-linear regression/least- squares methods combined with a utilization of a Second-order optimization algorithm.

It is intended to generalize the model by eliminating some of the assumptions imposed in the present and applying it to actual economic conditions after the collection of actual data in the Greek environment.