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Canonical Classical Growth Models and Homogeneity

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

Author

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  • Bjarne S. Jensen

    (University of Southern Denmark (SDU))

Abstract

To Samuelson (J Econ Literat 16:1415–1434, 1978), “A. Smith, Ricardo, Malthus, and Start Mill shared in common essentially one dynamic model of equilibrium, growth, and distribution - the same canonical classical model”. This chapter presents such classical growth model, in which growth in a one-sector model originates from the dynamic interaction between two factors, labor and capital, with land available in a fixed amount. The dynamic system for the two coordinate (state) variables, labor and capital, is formed by the classical long-run theory on wages (and propagation) and returns to capital. These factor prices are here determined by their marginal productivities, with classical regularity properties. The homogeneous dynamic system is solved for the capital-labor (ratio) solution and for the labor and capital (coordinate) solutions. Global stability properties for both types of solutions are examined, and the geometry of the phase portrait is illustrated for three types of technology: Cobb-Douglas, constant elasticity of substitution (CES), and linear. Comparative dynamics is given by a sensitivity analysis to the classical growth parameters.

Suggested Citation

  • Bjarne S. Jensen, 2025. "Canonical Classical Growth Models and Homogeneity," Springer Books, in: The Elements and Dynamic Systems of Economic Growth and Trade Models, edition 0, chapter 0, pages 199-225, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-52493-6_7
    DOI: 10.1007/978-3-031-52493-6_7
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