Research Of Economic Growth Complexcity Based On The Overlapping Generation Model

As the key content of socio-economic development, economic growth has shown the trend of being increasingly complex. Firstly, the economic entities show the trend of colliding, integrating and then moving toward to convergence in the process of interactive economic exchanging. Secondly, although the trend of economic globalization is obviously, the unbalance development in different economic entities just like widening gap between rich and poor exists simultaneously. Thirdly, the global economy is also facing very huge fluctuations, such as the financial crisis sweeping the world, which has an unexpected and complex effect on the future economy.How to explain the complexity of economic growth becomes one of the most important issues to the macroeconomists. The classical economic growth theory focuses on the unique equilibrium in the economic system which is the only growth road in the economy. Obviously, this can not effectively explain the complex economic development phenomenon. These theories concentrate on studying of the exogenous factors and complexities of economic growth. However, it may be more interested in the economic growth complexity caused by the endogenous factors. This is also in accordance with the situation that China is increasing its domestic demand to resist the bad world economic environment.And how to deal with the economic growth complexity, especially the test of extreme economic phenomenon like financial crisis is still another issue in front of economists and policy makers. The newest development of control theory provides new methods and conclusions for the choosing of structure and policy to manage economic complexity. So, it has some certain theoretical and practical significance to study the main resources and control of economic growth complexityThis study well defines the economic growth complexity, analyzes the main resources of economic growth complexity and points out the growth complexity is the result of complexity of economic system. This study selects four factors which are the main resources of economic complexity, such as human capital investment, social security (pension insurance), environment pollution and economic bubbles for deep analysis.Firstly, we study the dynamical effects of human capital investment to growth. The information cost effects the correct decision on human capital investment. So the fluctuations of information cost may transact to the output and finally cause economic growth fluctuations. We observe bifurcation in the corresponding dynamic system.Secondly, we introduce pension insurance, which is the most important item of social security, into the overlapping generation model. By using the new produce function, we find the pension insurance rate has an oscillatory effect on economic growth. The result proves the selection of a suitable pension insurance rate plays an important role in maintaining economic stability.Thirdly, we introduce the environment factor into the overlapping generation model, study the relationship between the nonlinear pollution accumulation and economic growth and find new conditions of fluctuations in the corresponding system. There is an interaction relationship between the human beings and environment. On one hand, the development of society is impossible without the environment. On the other hand, the economic growth causes environment deterioration. The unbalance between the two may exacerbate the instability and complexity of economic growth.Fourthly, economic bubble is another resource of economic growth complexity. The existence of economic bubble is the key issue in bubble study. This study gives both theoretical and practical analysis on this issue. On one hand, by introducing economic bubbles into the overlapping generation, we study the existence and uniqueness of bubbles in the three sector overlapping generation model. On the other hand, we also study the existence of bubble in Chinese stock by using the most update time series data.Based on the above dynamic analysis results, we try to deal with the economic growth complexity by using the modern control theories. We adopt the introduction of an external controller to suppress or reduce some existing complexity dynamics of a given system, thereby achieving some desirable dynamical behaviors or a higher utility level in some certain region. We may interpret controllers as follows:On one hand, the control terms could be viewed as intrinsic controllers in the market that suppress the oscillations. On the other hand, instruments of the government in trying to stabilize a fluctuating market by aiding a policy like tax or subsidy on wagesThe analysis indicates at least two cases which should be stressed. Firstly, based on the fundamental characteristics of the system, we come to the conclusion that the human capital investment, social security (pension insurance), environment pollution and economic bubble are the main recourses of economic growth complexity. However, there is controversy on the issue of complexity in economic and financial structures. Secondly, complexity can be controlled on logical and mathematical terms. The fundamental characteristics of the model are not changed by the control procedure as the steady state equilibrium remains the same. The tuning of the system can in fact be performed without relying on the system. The controlling methods do not require the exact knowledge of the underlying economy. So, the controlling method has good feasibility. The complexity controlling study provides quantitative result for policy making.