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Neoclassical production theory and growth with unemployment: The stability issue revisited

  • Fanti, Luciano
  • Manfredi, Piero

A common belief in economic growth theory is that the instability of the balanced growth path of models based on a non-neoclassical production theory, such as the Harrod-Domar or Goodwin-type models, may be removed by introducing neoclassical technology and substitutability between factors. This does not need to be true. As shown in this paper, Solow-type models with sluggishly adjusting, non-market-clearing, real wages and endogenous fertility may suffer instability. Not only: instability may be favoured by too strong a degree of neoclassical substitution in the economy.

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Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 20 (2009)
Issue (Month): 2 (June)
Pages: 126-135

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Handle: RePEc:eee:streco:v:20:y:2009:i:2:p:126-135
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/525148

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