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Capital utilization and the foundations of club convergence

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  • Dalgaard, Carl-Johan
  • Winther Hansen, Jes

Abstract

Club convergence may arise as an empirical prediction from standard neoclassical growth models where the aggregate production technology displays diminishing returns to capital. This requires that the propensity to save from wage income is greater than the propensity to save from capital income. This paper shows how endogenous capital utilization may produce such savings behavior in an otherwise standard Solow model. That is, even if households save a constant fraction of total income multiple stable steady states may arise when capital utilization is endogenously determined.
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  • Dalgaard, Carl-Johan & Winther Hansen, Jes, 2005. "Capital utilization and the foundations of club convergence," Economics Letters, Elsevier, vol. 87(2), pages 145-152, May.
    • Handle: RePEc:eee:ecolet:v:87:y:2005:i:2:p:145-152
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    Cited by:

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    2. Kraay, Aart & Raddatz, Claudio, 2007. "Poverty traps, aid, and growth," Journal of Development Economics, Elsevier, vol. 82(2), pages 315-347, March.
    3. Eckey, Hans-Friedrich & Türck, Matthias, 2007. "Convergence of EU-Regions. A Literature Report," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 10, pages 5-32.
    4. Melanie Rapino & Benjamin Spaulding & Dean M. Hanink, 2006. "Have Per Capita Earnings and Income Converged across New England?," Growth and Change, Wiley Blackwell, vol. 37(4), pages 620-637, December.
    5. Hiroaki Sasaki, 2022. "Growth and income distribution in an economy with dynasties and overlapping generations," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 215-238, April.
    6. Martial Dupaigne, 2007. "Les variations choisies de l'utilisation du capital : une revue des implications macroéconomiques," Revue d'économie politique, Dalloz, vol. 117(2), pages 161-196.
    7. Rosa Bernardini Papalia & Silvia Bertarelli, 2013. "Nonlinearities in economic growth and club convergence," Empirical Economics, Springer, vol. 44(3), pages 1171-1202, June.
    8. Eckey, Hans-Friedrich & Türck, Matthias, 2005. "Convergence of EU-regions: A literature report," Volkswirtschaftliche Diskussionsbeiträge 80, University of Kassel, Faculty of Economics and Management.
    9. Sasaki, Hiroaki & Hagiwara, Takefumi & Pham, Huong & Fukatani, Noriki & Ogawa, Shogo & Okahara, Naoto, 2021. "How Does Automation Affect Economic Growth and Income Distribution in a Two-Class Economy?," MPRA Paper 106481, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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