Goodwin on the optimal growth path for a developing economy

Prabhat Patnaik

Cambridge Journal of Economics, 2015, vol. 39, issue 6, 1579-1586

Abstract: Richard Goodwin was a pioneer in formulating an optimal growth model for a developing economy with a finite, though not fixed, time horizon. The problem he analysed was as follows: what is the optimal path of traverse for a developing economy, which has a certain capital stock embodying an old technique (i.e. one with a lower labour productivity) and is saddled additionally with disguised unemployment, if it is to be transformed into one where the entire labour force (assumed to be growing at an exogenously given rate) is fully employed on capital stock embodying a new technique with a much higher labour productivity, but with the same capital–output ratio as the older stock?

Date: 2015
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