Capital-labor substitution and balanced growth
AbstractThis paper explores how different values of the elasticity of substitution between capital and labor ([sigma]) impact on the balanced growth paths and growth potential of a country in exogenous growth models. The behavior of the system depends on the value of [sigma] and the passage of [sigma] through two critical values causes a qualitative change in the nature of the singular points and of its trajectories. The balanced growth path defined by a singular point in the form of a saddle-path exists and is locally stable if [sigma] lies between two critical values.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Macroeconomics.
Volume (Year): 32 (2010)
Issue (Month): 4 (December)
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Web page: http://www.elsevier.com/locate/inca/622617
Elasticity of substitution Economic growth Balanced growth path;
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