Adjustment costs in a variant of Uzawa's steady-state growth theorem

Andreas Irmen

Economics Bulletin, 2013, vol. 33, issue 4, 2860-2873

Abstract: Uzawa´s theorem (Uzawa (1961)) is extended to allow for adjustment costs in the process of capital accumulation. A new steady-state growth theorem with adjustment costs establishes that capital-augmenting technical change may arise in steady state. This is in sharp contrast to Uzawa´s original finding. In a growing economy this possibility arises since diminishing returns in the production of capital cause a gap between the growth of gross capital investments and the growth of capital. In steady state, capital-augmenting technical change has the role to fill this gap. The discussion of the new theorem characterizes the conditions under which a steady-state path with capital-augmenting technical change exists.

Keywords: Steady-State Growth; Capital Accumulation; Adjustment Costs; Uzawa´s Theorem (search for similar items in EconPapers)
JEL-codes: E1 O4 (search for similar items in EconPapers)
Date: 2013-12-03
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Citations: View citations in EconPapers (7)

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