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Capital-labor substitution and balanced growth

  • Mallick, Debdulal

This paper explores how different values of the elasticity of substitution between capital and labor ([sigma]) impact on the balanced growth paths and growth potential of a country in exogenous growth models. The behavior of the system depends on the value of [sigma] and the passage of [sigma] through two critical values causes a qualitative change in the nature of the singular points and of its trajectories. The balanced growth path defined by a singular point in the form of a saddle-path exists and is locally stable if [sigma] lies between two critical values.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 4 (December)
Pages: 1131-1142

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:4:p:1131-1142
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  1. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
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  9. Turnovsky, Stephen J., 2008. "The role of factor substitution in the theory of economic growth and income distribution: Two examples," Journal of Macroeconomics, Elsevier, vol. 30(2), pages 604-629, June.
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  13. de La Grandville, Olivier, 1989. "Erratum [In Quest of the Slutsky Diamond]," American Economic Review, American Economic Association, vol. 79(5), pages 1307, December.
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  15. Klump, Rainer & Preissler, Harald, 2000. " CES Production Functions and Economic Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 41-56, March.
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