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Neoclassical production theory and growth with unemployment: The stability issue revisited

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  • Fanti, Luciano
  • Manfredi, Piero

Abstract

A common belief in economic growth theory is that the instability of the balanced growth path of models based on a non-neoclassical production theory, such as the Harrod-Domar or Goodwin-type models, may be removed by introducing neoclassical technology and substitutability between factors. This does not need to be true. As shown in this paper, Solow-type models with sluggishly adjusting, non-market-clearing, real wages and endogenous fertility may suffer instability. Not only: instability may be favoured by too strong a degree of neoclassical substitution in the economy.

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Bibliographic Info

Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 20 (2009)
Issue (Month): 2 (June)
Pages: 126-135

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Handle: RePEc:eee:streco:v:20:y:2009:i:2:p:126-135

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Web page: http://www.elsevier.com/locate/inca/525148

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Keywords: Neoclassical growth Neoclassical production theory Unemployment Endogenous fertility Stability of the balanced growth path;

References

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  1. Oded Galor & David N. Weil, 1993. "The Gender Gap, Fertility, and Growth," NBER Working Papers 4550, National Bureau of Economic Research, Inc.
  2. Momota, Akira & Futagami, Koichi, 2000. "Demographic transition pattern in a small country," Economics Letters, Elsevier, vol. 67(2), pages 231-237, May.
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  11. Michaela Kreyenfeld, 2005. "Economic uncertainty and fertility postponement: evidence from German panel data," MPIDR Working Papers WP-2005-034, Max Planck Institute for Demographic Research, Rostock, Germany.
  12. Solow, Robert M., 2000. "Growth Theory: An Exposition," OUP Catalogue, Oxford University Press, edition 2, number 9780195109030, September.
  13. Giuseppe Bertola & Pietro Garibaldi, 2003. "The Structure and History of Italian Unemployment," CESifo Working Paper Series 907, CESifo Group Munich.
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Cited by:
  1. Luciano Fanati & Piero Manfredi, 2003. "Population, Unemployment and Economic Growth Cycles: A Further Explanatory Perspective," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 179-207, 05.

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