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Factor substitution and long-run growth in the Lucas model with elastic labor supply

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  • Gómez, Manuel A.

Abstract

We show that there exists a positive (resp., negative) relationship between the elasticity of factor substitution and long-run growth if the baseline ratio of physical capital to effective labor is above (resp., below) its steady-state value in the Lucas model with elastic labor supply.

Suggested Citation

  • Gómez, Manuel A., 2017. "Factor substitution and long-run growth in the Lucas model with elastic labor supply," Economics Letters, Elsevier, vol. 159(C), pages 180-184.
  • Handle: RePEc:eee:ecolet:v:159:y:2017:i:c:p:180-184
    DOI: 10.1016/j.econlet.2017.08.004
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    References listed on IDEAS

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    1. Xue, Jianpo & Yip, Chong K., 2012. "Factor Substitution And Economic Growth: A Unified Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 16(4), pages 625-656, September.
    2. Kaz Miyagiwa & Chris Papageorgiou, 2003. "Elasticity of substitution and growth: normalized CES in the Diamond model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(1), pages 155-165, January.
    3. Antonio Ladrón-de-Guevara & Salvador Ortigueira & Manuel S. Santos, 1999. "A Two-Sector Model of Endogenous Growth with Leisure," Review of Economic Studies, Oxford University Press, vol. 66(3), pages 609-631.
    4. Olivier de La Grandville & Rainer Klump, 2000. "Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions," American Economic Review, American Economic Association, vol. 90(1), pages 282-291, March.
    5. Andreas Irmen & Rainer Klump, 2009. "Factor Substitution, Income Distribution and Growth in a Generalized Neoclassical Model," German Economic Review, Verein für Socialpolitik, vol. 10(4), pages 464-479, November.
    6. Rainer Klump, 2001. "Trade, money and employment in intertemporal optimizing models of growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(4), pages 411-428.
    7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    More about this item

    Keywords

    Elasticity of substitution; Endogenous growth; Human capital;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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