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On the Dynamics of Basic Growth Models: Ratio Stability vs. Convergence and Divergence in State Space

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  • Thorsten Pampel

Abstract

We show for a class of basic growth models that convergence in ratios does not imply the pathwise convergence to the corresponding balanced growth path in the state space. We derive conditions on parameters and on the elasticity of the savings function for convergence or divergence and apply our results to the Solow model, an augmented Solow model as well as to an optimal growth model. An implication for the convergence debate is that two economies that differ only in the initial capital stock and converge in per capita terms might diverge to infinity in absolute terms. Copyright 2009 The Author. Journal Compilation Verein für Socialpolitik and Blackwell Publishing Ltd.

Suggested Citation

  • Thorsten Pampel, 2009. "On the Dynamics of Basic Growth Models: Ratio Stability vs. Convergence and Divergence in State Space," German Economic Review, Verein für Socialpolitik, vol. 10, pages 384-400, November.
    • Handle: RePEc:bla:germec:v:10:y:2009:i::p:384-400
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    References listed on IDEAS

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    1. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," Economic Journal, Royal Economic Society, vol. 106(437), pages 1056-1069, July.
    2. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    3. Bjarne S. Jensen & Preben K. Alsholm & Morgens E. Larsen & Jens Martin Jensen, 2005. "Dynamic Structure, Exogeneity, Phase Portraits, Growth Paths, and Scale and Substitution Elasticities," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 59-89, February.
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    Cited by:

    1. Bjarne S. Jensen, 2009. "Dynamic Extensions of the Solow Growth Model (1956): Editorial," German Economic Review, Verein für Socialpolitik, vol. 10, pages 378-383, November.
    2. Böhm, Volker, 2020. "Stable Balanced Expansion in Homogeneous Dynamic Models," Center for Mathematical Economics Working Papers 617, Center for Mathematical Economics, Bielefeld University.
    3. Bjarne S. Jensen, 2009. "Dynamic Extensions of the Solow Growth Model (1956): Editorial," German Economic Review, Verein für Socialpolitik, vol. 10(4), pages 378-383, November.
    4. Böhm, Volker, 2014. "Rational Expectations and the Stability of Balanced Monetary Development," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100423, Verein für Socialpolitik / German Economic Association.

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