Interactions Between Government And Enterprises

The theory of economic growth is an ancient and trendy topic ineconomic research field. Why the young American so rich, and the ancientChina still do its best to increase its per capita GDP. There is also a problemwhy the Iraq was so poor with a lot of oil? The pursuit of wealth and materialaccumulation is one of the most important goal of human development. So theeconomic growth is the only way to achieve the ultimate goal.In order to analyze the behaviors of the government and the enterprises,this paper will establish a new growth model, which combined classicaleconomic growth model, the stochastic differential theory and dynamic gametheory. The traditional economic growth model include neo-classicaleconomic growth model, endogenous growth models, new institutionaleconomics model period and so on. Some of these models had been improvedor adjusted in different way. Although the neo-classical economic growthmodel has many deficiencies, it still fit the economic data well nowadays. Sothis paper will still adopt the neoclassical production function as in the Solowgrowth model. With the traditional economic growth theory and game theory,this paper establish a two-players game system include the government andenterprises. The model has two control variable--the tax rates controlled bygovernment and the reinvestment rate controlled by the capitalists. So themodel makes the two variable as endogenous variables in the economicgrowth system which is different from the traditional economic growth model.In this paper, there are two different conditions. One is under certainty, inwhich the exogenous labor force growth rate and technology growth rate isdetermined. And the other is under uncertainty. Under certainty, the economicgrowth model gets an open-loop Nash equilibrium solution and an feedbackNash equilibrium solution for the government and enterprises game system.The solution include that the tax rate is1and the corporate reinvestment rateis0. Also the solution indicates the economy will stop increasing. In order tomake the model fit the real word well, we relax the assumption in the end ofthe chapter III. So we get a modified model and do a numerical analysis. The second model takes the uncertainty into the model. And we get a Markov Nashequilibrium solution. Both of the Government and the enterprises strategiesare different from the strategies under certainty. The solution indicates theeconomy is growing, and social justice has been done. Finally, this paperstudied the cooperative game under certainty and uncertainty. By using thefeedback Nash equilibrium solution, we get the total payoff about thenon-cooperation game and the cooperation game. We find the overall paymentincluding government and enterprises in cooperation game is larger than innon-cooperation game.