IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/71512.html
   My bibliography  Save this paper

The steady-state growth conditions of neoclassical growth model and Uzawa theorem revisited

Author

Listed:
  • Li, Defu
  • Huang, Jiuli

Abstract

Based on a neoclassical growth model including adjustment costs of investment, this paper proves that the essential condition for neoclassical model to have steady-state growth path is that the sum of change rate of the marginal efficiency of capital accumulation (MECA) and the rate of capital-augmenting technical change (CATC) be zero. We further confirm that Uzawa(1961)’s steady-state growth theorem that says the steady-state technical change of neoclassical growth model should exclusively be Harrod neutral, holds only if the marginal efficiency of capital accumulation is constant, which in turn implies that the capital supply should be infinitely elastic. Uzawa’s theorem has been misleading the development of growth theorem by not explicitly specifying this prerequisite, and thus should be revisited.

Suggested Citation

  • Li, Defu & Huang, Jiuli, 2016. "The steady-state growth conditions of neoclassical growth model and Uzawa theorem revisited," MPRA Paper 71512, University Library of Munich, Germany, revised 21 May 2016.
    • Handle: RePEc:pra:mprapa:71512
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/71512/1/MPRA_paper_71512.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    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. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 517-549.
    3. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, March.
    4. Andreas Irmen, 2013. "Adjustment costs in a variant of Uzawa's steady-state growth theorem," Economics Bulletin, AccessEcon, vol. 33(4), pages 2860-2873.
    5. Miguel-Angel Martín & Agustín Herranz, 2004. "Human capital and economic growth in Spanish regions," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 10(4), pages 257-264, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Irmen, Andreas, 2018. "A Generalized Steady-State Growth Theorem," Macroeconomic Dynamics, Cambridge University Press, vol. 22(4), pages 779-804, June.
    2. Li, Defu & Bental, Benjamin, 2019. "A Generalized Growth Model and the Direction of Technological Progress," MPRA Paper 96509, University Library of Munich, Germany.
    3. Ekkehart Schlicht, 2016. "Directed Technical Change and Capital Deepening: A Reconsideration of Kaldor's Technical Progress Function," Metroeconomica, Wiley Blackwell, vol. 67(1), pages 119-151, February.
    4. Li, Defu & Bental, Benjamin & Huang, Jiuli, 2016. "Stationary Growth and the Impossibility of Capital Efficiency Gains," MPRA Paper 71516, University Library of Munich, Germany.
    5. Li, Defu & Benjamin, Bental, 2021. "Factor Supply Elasticities, Returns to Scale, and the Direction of Technological Progress," MPRA Paper 109920, University Library of Munich, Germany.
    6. Li, Defu & Bental, Benjamin, 2016. "What determines the direction of technological progress?," MPRA Paper 71517, University Library of Munich, Germany.
    7. Li, Defu & Bental, Benjamin, 2023. "What determines the Direction of Technological Progress(2023.11.16)?," MPRA Paper 119211, University Library of Munich, Germany, revised 16 Nov 2023.
    8. Gregory Casey & Ryo Horii, 2019. "A Multi-factor Uzawa Growth Theorem and Endogenous Capital-Augmenting Technological Change," ISER Discussion Paper 1051, Institute of Social and Economic Research, Osaka University.
    9. Jakub Growiec, 2008. "A new class of production functions and an argument against purely labor‐augmenting technical change," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(4), pages 483-502, December.
    10. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
    11. Rainer Klump & Peter McAdam & Alpo Willman, 2012. "The Normalized Ces Production Function: Theory And Empirics," Journal of Economic Surveys, Wiley Blackwell, vol. 26(5), pages 769-799, December.
    12. Miguel A. León-Ledesma & Peter McAdam & Alpo Willman, 2010. "Identifying the Elasticity of Substitution with Biased Technical Change," American Economic Review, American Economic Association, vol. 100(4), pages 1330-1357, September.
    13. Thomas Ziesemer, 2023. "Labour-augmenting technical change data for alternative elasticities of substitution: growth, slowdown, and distribution dynamics," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 32(4), pages 449-475, May.
    14. LI, Defu & Bental, Benjamin, 2015. "Growth with Endogenous Direction of Technical Change," MPRA Paper 64124, University Library of Munich, Germany.
    15. Ekaterina Ponomareva & Alexandra Bozhechkova & Alexandr Knobel, 2012. "Factors of Economic Growth," Published Papers 172, Gaidar Institute for Economic Policy, revised 2013.
    16. Irmen Andreas, 2020. "Endogenous task-based technical change—factor scarcity and factor prices," Economics and Business Review, Sciendo, vol. 6(2), pages 81-118, June.
    17. Michael Knoblach & Fabian Stöckl, 2020. "What Determines The Elasticity Of Substitution Between Capital And Labor? A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 847-875, September.
    18. Yashin, Pete, 2016. "Кризис И Рост Неравенства. Оптимальный Путь Экономического Роста [The crisis and increasing inequality. The best equilibrium growth path]," MPRA Paper 73544, University Library of Munich, Germany.
    19. de la Fonteijne, Marcel R., 2018. "Why the concept of Hicks, Harrod, Solow neutral and even non-neutral augmented technical progress is flawed in principle in any economic model," MPRA Paper 107730, University Library of Munich, Germany.
    20. Gregory Casey, 2018. "Technology-Driven Unemployment," 2018 Meeting Papers 302, Society for Economic Dynamics.

    More about this item

    Keywords

    Neoclassical Growth Model; Uzawa’s Theorem; Direction of Technical Change; Adjustment Cost;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:71512. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.