Economists frequently confine themselves to the qualitative analysis of continuous optimization problems or they restrict their quantitative analysis to inaccurate methods like linearization around the steady state. The fact that the solution is characterized by an inherently unstable adjustment...

Quantitative aspects of adjustment processes in economic growth remain frequently unsolved or are tackled with bulky or inaccurate methods like multiple shooting or log-linearization. Mulligan's (1991) method of time elimination, however, has improved the analysis of saddle path dynamics in...

We present a non-linear solution method of saddlepoint dynamics in discrete time optimization problems. It is based on the backward attractivity of the stable manifold and is very easy to implement. After an introduction to the general method we present two applications. First we consider the...

This paper analyses the long run effects of the 2000 Income Tax Act in Estonia in a dynamic equilibrium model. It studiesthe impact of the shift from an imputation system to a system in which companies pay taxes only with respect to distributed profits.Balanced growth paths, transitional...

The paper analyses the interaction between capital structure and employment decisions of firms. For this purpose, a theoretical model is developed in which a firm determines employment along an optimal path taking into account financial considerations. The empirical analysis using West German...

The paper analyses dynamic investment behaviour and labour demand of the financially restricted firm. It shows that firm development is characterised by a negative correlation between leverage and the stocks of capital and labour but a positive correlation between leverage and investment and...

This paper reports an attempt to implement financial factors into a neoclassical model of optimal factor demand. The theoretical shows that factor demand decisions of firms operating under monopolistic competition or with decreasing returns to scale are affected by financial restrictions. The...

The paper presents the long-run equilibrium and development dynamics in the neoclassical growth model and a simple model of endogenous growth when property rights are absent. The results are compared to the outcome in a corresponding model economy with secure property rights. The main findings...

The paper presents a model where the interplay between fertility, child labour, and education can explain economic stagnation when parents live in an environment of high child mortality. If in contrast child mortality is low, the solution of the parental decision problem leads to perpetual...

We set up an endogenous growth model with physical capital, human capital and blueprints for intermediate goods. The model can generate steady-state growth or stagnation. Along the adjustment path for a developing economy we can distinguish different stages of development. The first stage is...