Beyond the Linearity Critique: The Knife-Edge Assumption of Steady State Growth
AbstractThe "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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Bibliographic InfoPaper provided by EconWPA in its series GE, Growth, Math methods with number 0505003.
Length: 20 pages
Date of creation: 09 May 2005
Date of revision: 23 Jun 2005
Note: Type of Document - pdf; pages: 20
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long-run economic growth; knife-edge conditions; linearity critique; ordinary differential equations;
Other versions of this item:
- Jakub Growiec, 2007. "Beyond the Linearity Critique: The Knife-edge Assumption of Steady-state Growth," Economic Theory, Springer, vol. 31(3), pages 489-499, June.
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-14 (All new papers)
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