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Flexible Technologies and Proportional Saving

In: The Elements and Dynamic Systems of Economic Growth and Trade Models

Author

Listed:
  • Bjarne S. Jensen

    (University of Southern Denmark (SDU))

Abstract

This chapter studies the analytic properties of a dynamic (growing) two-sector economy—consumer good and capital good—with flexible sector technologies and proportional saving. The price mechanism—flexible commodity and factor prices—is now instrumental in determining both the sectoral factor allocation of labor and capital and the output composition. The chapter presents the “miniature Walrasian general equilibrium system” model of the momentary and moving general equilibria in the commodity and factor markets. Within the framework homogeneous dynamics are derived the conditions for the existence, uniqueness, and stability properties of the families of steady-state solutions. A main result of the dynamic analysis is that the conditions for uniqueness and the global asymptotic stability of the long-run capital-labor ratio are ensured under much weaker mathematical and economic restrictions (more robust) than were traditionally assumed (imposed). The geometry of the system solutions, phase portrait (parabolic, hyperbolic), is derived with the respective conditions analytically expressed.

Suggested Citation

  • Bjarne S. Jensen, 2025. "Flexible Technologies and Proportional Saving," Springer Books, in: The Elements and Dynamic Systems of Economic Growth and Trade Models, edition 0, chapter 0, pages 439-461, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-52493-6_15
    DOI: 10.1007/978-3-031-52493-6_15
    as

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