Application of differential evolution algorithm for solving the Solow model with the addition of human capital

2018

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DOI 10.26577/jmmcs-2018-2-406
Data confidence 70 medium
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Abstract

This paper is devoted to a numerical study of defining of parameters of dynamical systems arising in financial and economic problems. The importance of parameters that are difficult to measure is great, so defining them will help to make forecasts and a work plan for the future at the governmental level. An effective way to restore parameters is to solve the inverse problem. The method of coefficient recovery using the algorithm of differential evolution, which was proposed by Rainer Storn and Kenneth Price, is presented in this paper. On the example of solving the direct problem of the mathematical model of neoclassical economic growth of Robert Solow and the results obtained, the inverse problem was solved and unknown parameters were determined. The Solow model is based on the Cobb-Douglas production function, taking into account labor, capital and exogenous neutral technical progress. Also, for further calculations, the economic model proposed by Mankiw-Romer-Weil based on the Solow model was considered, but with the addition of human capital, where the number of variables and coefficients that need to be restored has already increasing. A direct problem was also solved, results were obtained that were applied in the algorithm of differential evolution for parameters recovery.