On the Stability of Balanced Growth
Common folklore in growth theory suggests that the stability of balanced growth paths in the capital-labor space is essentially guaranteed by conditions which imply stability of the corresponding steady states of the models in intensity form. We show by means of simple examples that, in general, these well-known conditions are only necessary. For a class of deterministic growth models with discrete time we provide new structural insights into the nature of this phenomenon by stating additional requirements that ensure stability of balanced growth paths in the original capital-labor space. We introduce a notion of path-wise convergence for stochastic growth models and generalize our sufficient conditions to the stochastic case.
|Date of creation:||Aug 2007|
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