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Revisting the Steady-State Equilibrium Conditions of Neoclassical Growth Models

Author

Listed:
  • Li, Defu
  • Huang, Jiuli
  • Zhou, Ying

Abstract

Since the publication of Uzawa(1961), it has been widely accepted that technical change must be purely labor-augmenting for a growth model to exhibit steady-state path. But in this paper, we argue that such a constraint is unnecessary. Further, our model shows that, as long as the sum of the growth rate of marginal efficiency of capital accumulation and the rate of capital-augmenting technological progress equals zero, steady-state growth can be established without constraining the direction of technological change. Thus Uzawa’s theorem represents only a special case, and the explanatory power of growth models would be greatly enhanced if such a constraint is removed.

Suggested Citation

  • Li, Defu & Huang, Jiuli & Zhou, Ying, 2013. "Revisting the Steady-State Equilibrium Conditions of Neoclassical Growth Models," MPRA Paper 55045, University Library of Munich, Germany, revised May 2013.
  • Handle: RePEc:pra:mprapa:55045
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    File URL: https://mpra.ub.uni-muenchen.de/55045/1/MPRA_paper_55045.pdf
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    References listed on IDEAS

    as
    1. Mussa, Michael L, 1977. "External and Internal Adjustment Costs and the Theory of Aggregate and Firm Investment," Economica, London School of Economics and Political Science, vol. 44(174), pages 163-178, May.
    2. Bailey, Roy E & Scarth, William M, 1980. "Adjustment Costs and Aggregate Demand Theory," Economica, London School of Economics and Political Science, vol. 47(188), pages 423-431, November.
    3. Foley, Duncan K & Sidrauski, Miguel, 1970. "Portfolio Choice, Investment and Growth," American Economic Review, American Economic Association, vol. 60(1), pages 44-63, March.
    4. Growiec, Jakub, 2010. "Knife-edge conditions in the modeling of long-run growth regularities," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1143-1154, December.
    5. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, March.
    6. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 517-549.
    7. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75, pages 321-321.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Neoclassical Growth Model; Uzawa’s Steady-state Growth Theorem; Direction of Technical Change; Adjustment Cost;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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