Canonical Classical Models and Minimal Factor Rewards

Bjarne S. Jensen ()
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Bjarne S. Jensen: University of Southern Denmark (SDU)

Chapter Chapter 8 in The Elements and Dynamic Systems of Economic Growth and Trade Models, 2025, pp 227-237 from Springer

Abstract: Abstract The existence of positive minimal factor rewards for both factors, labor and capital, had the attention of the classicists, especially Ricardo and Malthus, and this chapter extends the dynamic system of Chap. 7 with explicit parameters for the minimum (real) factor prices. This version of the canonical classical growth model is no longer a global homogeneous dynamic system, as there with decreasing returns to scale will now necessarily exist an isolated interior critical point, a stationary state solution, an attractor also called a Malthusian trap of stagnation. By using Olech’s theorem, the global asymptotic stability of the stationary state is proved, and a phase portrait (classical node) of the Malthusian stagnation (trap) is shown. With structural parameter change such as constant returns to scale, the stationary state (equilibrium) can bifurcate here into [ not as Hopf into a closed curve (periodic solution) ] an always expanding economy converging in the long run to steady-state (balanced) growth.

Keywords: Minimal factor rewards; Canonical classical growth model; Malthusian trap of stagnation; Olech’s theorem (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-52493-6_8

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DOI: 10.1007/978-3-031-52493-6_8

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