A Remark on the Form of Accumulation Functions in Economic Growth Models
AbstractThis study is a remark designed to underline the importance of using the right form of accumulation functions in economic growth models. After appearance of endogenous growth models in the growth literature, exclusion of a counter-force in the accumulation function, though required by the nature of the variable, is started to be made more frequently. This (mis-)behavior is due to now a common knowledge that a growth model must rely on non-diminishing returns to a factor of production in order to generate endogenous growth. This rule, however, can lead to the following potentially misleading assumption: diminishing marginal productivity to each factor of production-given that there is no other source of long run growth-is sufficient for generating (the true) steady state equilibrium (at levels). In this work, we heuristically argue that an accumulation function with no counter-moving force, though it is required by the nature of the variable, with or without diminishing returns, may bias the results of the model.
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Bibliographic InfoArticle provided by Ege University Faculty of Economics and Administrative Sciences in its journal Ege Academic Review.
Volume (Year): 12 (2012)
Issue (Month): 4 ()
Accumulation function; counter-moving force; steady state; differential equations; economic growth..;
Other versions of this item:
- Ý. Hakan Yetkiner, 2012. "A Remark on the Form of Accumulation Functions in Economic Growth Models," Working Papers 1204, Izmir University of Economics.
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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