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On the Dynamics of Basic Growth Models: Ratio Stability vs. Convergence and Divergence in State Space

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  • Thorsten Pampel
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    Abstract

    We show for a class of basic growth models that convergence in ratios does not imply the pathwise convergence to the corresponding balanced growth path in the state space. We derive conditions on parameters and on the elasticity of the savings function for convergence or divergence and apply our results to the Solow model, an augmented Solow model as well as to an optimal growth model. An implication for the convergence debate is that two economies that differ only in the initial capital stock and converge in per capita terms might diverge to infinity in absolute terms. Copyright 2009 The Author. Journal Compilation Verein für Socialpolitik and Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Verein für Socialpolitik in its journal German Economic Review.

    Volume (Year): 10 (2009)
    Issue (Month): (November)
    Pages: 384-400

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    Handle: RePEc:bla:germec:v:10:y:2009:i::p:384-400

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    1. Jan Wenzelburger & Volker Böhm & Thorsten Pampel, 2007. "On the Stability of Balanced Growth," Keele Economics Research Papers KERP 2007/09, Centre for Economic Research, Keele University.
    2. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," CEPR Discussion Papers 1350, C.E.P.R. Discussion Papers.
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