Neoclassical growth and the "trivial" steady state

Hendrik Hakenes and Andreas Irmen

Journal of Macroeconomics, 2008, vol. 30, issue 3, 1097-1103

Abstract: According to a common perception, the neoclassical economy void of capital cannot evolve to strictly positive levels of output, if capital is essential. We challenge this view and claim for a broad class of production functions, encompassing the neoclassical production function, that a take-off is possible even though the initial capital stock is zero and capital is essential. Since the marginal product of capital is initially infinite, the "trivial" steady state becomes so unstable that the solution to the equation of motion involves the possibility of a take-off. When it happens, the take-off has no cause.

Date: 2008
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Working Paper: Neoclassical Growth and the 'Trivial' Steady State (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:30:y:2008:i:3:p:1097-1103

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