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Elasticity of substitution and general model of economic growth

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  • Constantin Chilarescu

Abstract

The main purpose of this paper is to generalize some recent results obtained by Chilarescu and Manuel Gomez. Essentially, we are trying to study the effect of elasticity of substitution on the parameters of economic growth, based on its two possible values - lower and higher than one. We show that a higher elasticity of substitution increases per capita income, the relative share of physical capital, the common growth rate and the share of human capital allocated to the production sector, and this property is not affected by the position of the elasticity of substitution - below or above one.

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  • Constantin Chilarescu, 2025. "Elasticity of substitution and general model of economic growth," Papers 2506.02936, arXiv.org.
    • Handle: RePEc:arx:papers:2506.02936
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    References listed on IDEAS

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    1. Manuel A. Gómez, 2024. "Elasticity of substitution, long‐run growth, and convergence speed: A general framework," International Journal of Economic Theory, The International Society for Economic Theory, vol. 20(3), pages 352-370, September.
    2. Gómez, Manuel A., 2023. "Factor substitution, long-run equilibrium, and convergence speed in the Lucas model," Economics Letters, Elsevier, vol. 232(C).
    3. 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.
    4. Boucekkine, R. & Ruiz-Tamarit, J.R., 2008. "Special functions for the study of economic dynamics: The case of the Lucas-Uzawa model," Journal of Mathematical Economics, Elsevier, vol. 44(1), pages 33-54, January.
    5. Chilarescu, Constantin, 2011. "On the existence and uniqueness of solution to the Lucas–Uzawa model," Economic Modelling, Elsevier, vol. 28(1), pages 109-117.
    6. Manuel Gómez, 2016. "Factor substitution is an engine of growth in a model with productive public expenditure," Journal of Economics, Springer, vol. 117(1), pages 37-48, January.
    7. 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.
    8. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    9. Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996. "A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics," Journal of Economic Theory, Elsevier, vol. 68(1), pages 149-173, January.
    10. Gómez, Manuel A., 2018. "Factor substitution and convergence speed in the neoclassical model with elastic labor supply," Economics Letters, Elsevier, vol. 172(C), pages 89-92.
    11. Manuel A. Gómez, 2020. "Factor substitution, long‐run growth, and speed of convergence in the one‐sector convex endogenous‐growth model," Metroeconomica, Wiley Blackwell, vol. 71(1), pages 2-21, February.
    12. Chilarescu, Constantin, 2011. "On the existence and uniqueness of solution to the Lucas-Uzawa model," Economic Modelling, Elsevier, vol. 28(1-2), pages 109-117, January.
    13. 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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