Neoclassical production theory and growth with unemployment: The stability issue revisited

Luciano Fanti and Piero Manfredi

Structural Change and Economic Dynamics, 2009, vol. 20, issue 2, pages 126-135

Abstract: A common belief in economic growth theory is that the instability of the balanced growth path of models based on a non-neoclassical production theory, such as the Harrod-Domar or Goodwin-type models, may be removed by introducing neoclassical technology and substitutability between factors. This does not need to be true. As shown in this paper, Solow-type models with sluggishly adjusting, non-market-clearing, real wages and endogenous fertility may suffer instability. Not only: instability may be favoured by too strong a degree of neoclassical substitution in the economy.

Keywords: Neoclassical; growth; Neoclassical; production; theory; Unemployment; Endogenous; fertility; Stability; of; the; balanced; growth; path (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:streco:v:20:y:2009:i:2:p:126-135

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