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Growth with a Fixed Factor

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Author Info

  • Erzo G. J. Luttmer

    ()
    (Department of Economics, University of Minnesota and Federal Reserve Bank of Minnesota)

Abstract

Consider an economy in which a fi xed supply of unskilled labor can be combined with knowledge capital to produce consumption. The technology for accumulating knowledge capital is linear in knowledge capital. This leads to long-term growth if the production function for consumption goods is approximately Cobb-Douglas for large values of the stock of knowledge capital. The quality-ladder economy of Boldrin and Levine [2010] generates a menu of Leontief technologies with this feature. If the initial capital stock is low, there can be a long period of stagnation before unskilled wages start to grow, as in Lewis [1954]. A small open economy with a sufficiently low initial capital stock will run a trade surplus during its initial stages of development.

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File URL: http://www.econ.umn.edu/merr/2012_1.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by University of Minnesota, Department of Economics in its series Working Papers with number 2012-1.

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Length: 36 pages
Date of creation: 01 Jan 2012
Date of revision:
Handle: RePEc:min:wpaper:2012-1

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Keywords: economic growth; aggregate productivity;

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  1. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc.
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Cited by:
  1. Ezra Oberfield & Devesh Raval, 2012. "Micro data and macro technology," Working Paper Series WP-2012-11, Federal Reserve Bank of Chicago.

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