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An Endogenously Derived AK-model of Economic Growth

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  • Jensen, Christian

Abstract

Assuming a production process with returns to scale that vary with the intensity it is operated at, an AK-model of endogenous growth with constant returns to scale in production is shown to arise due to replication driven by profit-maximization. If replication occurs at the efficiency-maximizing scale, the result applies also when the number of production processes must be discrete, thus overcoming the so-called integer problem. When competition is imperfect, there is only convergence toward the AK-model for large enough input use, so an economy is more prone to stalling in a steady-state without growth, the smaller and less competitive it is. Inefficient scaling also raises the risk of stalling.

Suggested Citation

  • Jensen, Christian, 2013. "An Endogenously Derived AK-model of Economic Growth," MPRA Paper 44487, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:44487
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    File URL: https://mpra.ub.uni-muenchen.de/45639/1/MPRA_paper_44487.pdf
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    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    3. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 543-573, December.
    4. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
    5. 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.
    6. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 531-555.
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    Cited by:

    1. Jensen Christian, 2014. "Replication and Returns to Scale in Production," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 1-22, February.

    More about this item

    Keywords

    Economic growth; AK-model; Replication; Returns to scale in production; Integer problem;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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