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Neoclassical growth and the "trivial" steady state

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  • Hakenes, Hendrik
  • Irmen, Andreas

Abstract

According to a common perception, the neoclassical economy void of capital cannot evolve to strictly positive levels of output, if capital is essential. We challenge this view and claim for a broad class of production functions, encompassing the neoclassical production function, that a take-off is possible even though the initial capital stock is zero and capital is essential. Since the marginal product of capital is initially infinite, the "trivial" steady state becomes so unstable that the solution to the equation of motion involves the possibility of a take-off. When it happens, the take-off has no cause.

Suggested Citation

  • Hakenes, Hendrik & Irmen, Andreas, 2008. "Neoclassical growth and the "trivial" steady state," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1097-1103, September.
    • Handle: RePEc:eee:jmacro:v:30:y:2008:i:3:p:1097-1103
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    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    3. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    4. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-1026, October.
    5. repec:bla:ecorec:v:78:y:2002:i:243:p:375-80 is not listed on IDEAS
    6. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
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    Cited by:

    1. Zhang, Jin Shui, 2011. "The analytical solution of balanced growth of non-linear dynamic multi-sector economic model," Economic Modelling, Elsevier, vol. 28(1), pages 410-421.

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    More about this item

    JEL classification:

    • N60 - Economic History - - Manufacturing and Construction - - - General, International, or Comparative
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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