The Solow model under localized technical change

Mehdi Senouci

Working Papers from HAL

Abstract: Textbook growth models typically fail to account for the absence of global convergence in income per capita, for the growth effects of the investment rate, and for the existence of large swings in the labor share over the medium run. In this paper, I set a Solow model animated by a formof localized technical change. I assume that productivity growth is an increasing function of the capital-output ratio. I prove that the model has a globally stable balanced growth path. If technical change is locally biased, then the growth rate is a strictly increasing function of the saving rate, and the labor share slowly tends to zero along any balanced growth path.

Keywords: Solow model; Biased technical change; Steady growth theorem; Convergence; Labor share (search for similar items in EconPapers)
Date: 2024-06-27
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