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

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  • Fanti, Luciano
  • Manfredi, Piero

Abstract

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.

Suggested Citation

  • Fanti, Luciano & Manfredi, Piero, 2009. "Neoclassical production theory and growth with unemployment: The stability issue revisited," Structural Change and Economic Dynamics, Elsevier, vol. 20(2), pages 126-135, June.
  • Handle: RePEc:eee:streco:v:20:y:2009:i:2:p:126-135
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    References listed on IDEAS

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    Cited by:

    1. Luciano Fanati & Piero Manfredi, 2003. "Population, Unemployment and Economic Growth Cycles: A Further Explanatory Perspective," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 179-207, May.
    2. Danesh Miah, Md. & Farhad Hossain Masum, Md. & Koike, Masao, 2010. "Global observation of EKC hypothesis for CO2, SOx and NOx emission: A policy understanding for climate change mitigation in Bangladesh," Energy Policy, Elsevier, vol. 38(8), pages 4643-4651, August.

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