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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
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  2. de la Grandville,Olivier, 2009. "Economic Growth," Cambridge Books, Cambridge University Press, number 9780521725200.
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  10. Rainer Klump & Peter McAdam & Alpo Willman, 2007. "Factor Substitution and Factor-Augmenting Technical Progress in the United States: A Normalized Supply-Side System Approach," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 183-192, February.
  11. Turnovsky, Stephen J., 2002. "Intertemporal and intratemporal substitution, and the speed of convergence in the neoclassical growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1765-1785, August.
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