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Beyond the Linearity Critique: The Knife-Edge Assumption of Steady State Growth

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Author Info
Jakub Growiec (Warsaw School of Economics)

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Abstract

The "linearity critique" of endogenous growth models is presented in a general context of an arbitrary growth model and reassessed. It is argued, that presence of linearities is not a valid criterion for rejecting growth models. Existence of exponential/geometrical steady- state growth (i.e. of a balanced growth path with strictly positive growth rates) necessarily requires some knife-edge condition, which is not satisfied by typical parameter values. Hence, balanced growth paths are fragile and sensitive to smallest disturbances in parameter values. Adding higher order differential/difference equations to a model does not change the knife-edge character of steady-state growth.

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File URL: http://129.3.20.41/eps/ge/papers/0505/0505003.pdf
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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0505003.

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Length: 20 pages
Date of creation: 09 May 2005
Date of revision: 23 Jun 2005
Handle: RePEc:wpa:wuwpge:0505003

Note: Type of Document - pdf; pages: 20
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Web page: http://129.3.20.41

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Related research
Keywords: long-run economic growth; knife-edge conditions; linearity critique; ordinary differential equations;

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Find related papers by JEL classification:
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Charles I. Jones, . "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," Working Papers 99008, Stanford University, Department of Economics. [Downloadable!]
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  2. Connolly, Michelle & Peretto, Pietro F, 2003. " Industry and the Family: Two Engines of Growth," Journal of Economic Growth, Springer, vol. 8(1), pages 115-48, March. [Downloadable!] (restricted)
  3. Jones, Charles I., 2005. "Growth and Ideas," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 16, pages 1063-1111 Elsevier. [Downloadable!] (restricted)
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  4. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August. [Downloadable!] (restricted)
  5. Jonathan Temple, 2003. "The Long-Run implications of Growth Theories," Journal of Economic Surveys, Blackwell Publishing, vol. 17(3), pages 497-510, 07. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christian Groth & Karl-Josef Koch & Thomas M. Steger, 2009. "When economic growth is less than exponential," Volkswirtschaftliche Diskussionsbeitraege 129-09, Universität Siegen, Fachbereich Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht. [Downloadable!]
    Other versions:
  2. Attar, Mustafa A., 2008. "Science in the Third Dimension of R&D," MPRA Paper 9427, University Library of Munich, Germany. [Downloadable!]
  3. Daniel Cardona & Fernando Sanchez Losada, 2007. "Cost-Based Models of Economic Growth," Working Papers in Economics 179, Universitat de Barcelona. Espai de Recerca en Economia. [Downloadable!]
  4. Growiec, Jakub, 2008. "Knife-edge conditions in the modeling of long-run growth regularities," MPRA Paper 9956, University Library of Munich, Germany. [Downloadable!]
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