On the Dynamics of Basic Growth Models: Ratio Stability vs. Convergence and Divergence in State Space

Pampel Thorsten
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Pampel Thorsten: Bielefeld University, Universitätsstraße 25,Bielefeld, Germany

German Economic Review, 2009, vol. 10, issue 4, 384-400

Abstract: We show for a class of basic growth models that convergence in ratios does not imply the pathwise convergence to the corresponding balanced growth path in the state space. We derive conditions on parameters and on the elasticity of the savings function for convergence or divergence and apply our results to the Solow model, an augmented Solow model as well as to an optimal growth model. An implication for the convergence debate is that two economies that differ only in the initial capital stock and converge in per capita terms might diverge to infinity in absolute terms.

Keywords: Balanced growth; convergence; divergence; state space dynamics; ratio stability (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1111/j.1468-0475.2009.00487.x

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