Education and Tourism in a Small Open Growth Economy

The purpose of this study is to build an economic growth of a small-open economy with endogenous education and tourism. The growth machines of the economy are endogenous human capital, wealth and tourism. The national economy is composed of one industrial sector, one service sector, and one education sector. The production side is based on Solow’s one-sector growth model and Uzawa’s two-sector growth model. The education sector is based on the Uzawa-Lucas two-sector growth model. International interactions are based on the literature of growth models for small open economies and the literature of growth and tourism. We apply Zhang’s utility function to describe household behavior. The household chooses consumption of goods and services, education time, and saving at each point of time. We simulate the nonlinear dynamic system. With the chosen parameter values the dynamic system is characterized of a unique stable equilibrium point. We carry out comparative dynamic analysis to demonstrate transitory as well as long-term effects of changes in different parameters.