Is Harrod-neutrality Needed for Balanced Growth? Uzawa's Theorem Revisited
Taking into account the adjustment costs of investment, this paper proves that it is not the neoclassical growth model itself but the specific form of capital accumulation function that requires technical change to exclusively be Harrod neutral in steady state. Uzawa’s(1961)steady-state growth theorem holds only when the marginal efficiency of capital accumulation is constant, which implies that the capital supply is infinitely elastic. Therefore, it is unnecessary to make strong assumptions about the shape of the production function and the direction of technical change for neoclassical growth model to exhibit steady-state growth.
|Date of creation:||2014|
|Date of revision:||Feb 2014|
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- 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)
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