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An Endogenously Derived AK-model of Economic Growth

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  • Jensen, Christian

Abstract

Assuming a production process with returns to scale that vary with the intensity it is operated at, an AK-model of endogenous growth with constant returns to scale in production is shown to arise due to replication driven by profit-maximization. If replication occurs at the efficiency-maximizing scale, the result applies also when the number of production processes must be discrete, thus overcoming the so-called integer problem. When competition is imperfect, there is only convergence toward the AK-model for large enough input use, so an economy is more prone to stalling in a steady-state without growth, the smaller and less competitive it is. Inefficient scaling also raises the risk of stalling.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 44487.

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Date of creation: Feb 2013
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Handle: RePEc:pra:mprapa:44487

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Keywords: Economic growth; AK-model; Replication; Returns to scale in production; Integer problem;

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  1. Charles I. Jones, . "Growth: With or Without Scale Effects?," Working Papers, Stanford University, Department of Economics 99001, Stanford University, Department of Economics.
  2. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  3. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 531-55, May.
  4. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 32(3), pages 543-573, December.
  5. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  6. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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