THE ELASTICITY OF SUBSTITUTION AS AN ENGINE OF GROWTH

Theodore Palivos and Giannis Karagiannis

Macroeconomic Dynamics, 2010, vol. 14, issue 5, 617-628

Abstract: This paper characterizes the elasticity of factor substitution in one-sector convex growth models with a general production function. It shows that an elasticity of substitution that is asymptotically greater than unity is a sufficient (but not a necessary) condition for the existence of a lower bound on the marginal product of capital, which in turn can lead to unbounded endogenous growth. Hence, an elasticity of substitution that eventually becomes greater than unity can counteract the role of diminishing returns to capital. This renders factor substitution a powerful engine of growth.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
Working Paper: The elasticity of substitution as an engine of growth (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:14:y:2010:i:05:p:617-628_00

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().