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On the Stability of Balanced Growth

Author

Listed:
  • Jan Wenzelburger

    (Keele University, Centre for Economic Research and School of Economic and Management Studies)

  • Volker Böhm

    (Dept. of Business Administration and Economics, Bielefeld University,)

  • Thorsten Pampel

    (Dept. of Business Administration and Economics, Bielefeld University,)

Abstract

Common folklore in growth theory suggests that the stability of balanced growth paths in the capital-labor space is essentially guaranteed by conditions which imply stability of the corresponding steady states of the models in intensity form. We show by means of simple examples that, in general, these well-known conditions are only necessary. For a class of deterministic growth models with discrete time we provide new structural insights into the nature of this phenomenon by stating additional requirements that ensure stability of balanced growth paths in the original capital-labor space. We introduce a notion of path-wise convergence for stochastic growth models and generalize our sufficient conditions to the stochastic case.

Suggested Citation

  • Jan Wenzelburger & Volker Böhm & Thorsten Pampel, 2007. "On the Stability of Balanced Growth," Keele Economics Research Papers KERP 2007/09, Centre for Economic Research, Keele University.
    • Handle: RePEc:kee:kerpuk:2007/09
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    File URL: http://www.keele.ac.uk/depts/ec/wpapers/kerp0709.pdf
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    More about this item

    Keywords

    Balanced growth; stability conditions; stochastic growth; pathwise convergence.;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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