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A bottleneck capital model of development

  • Jordan Rappaport

A convex marginal adjustment cost allows the neoclassical growth model to match observed transition paths for output growth, savings, investment, the real interest rate, and the shadow value of installed capital. Such an adjustment cost need apply only to one of two complementary capital inputs with minimal factor income share. The interaction of complementary capital inputs blurs the distinction between capital accumulation and productivity growth.

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Paper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number RWP 01-10.

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Date of creation: 2002
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Handle: RePEc:fip:fedkrw:rwp01-10
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