Steady-State Growth and the Elasticity of Substitution

Andreas Irmen

No 496, Working Papers from University of Heidelberg, Department of Economics

Abstract: In a neoclassical economy with endogenous capital- and labor-augmenting technical change the steady-state growth rate of output per worker is shown to increase in the elasticity of substitution between capital and labor. This confirms the assessment of Klump and de La Grandville (2000) that the elasticity of substitution is a powerful engine of economic growth. However, unlike their findings my result applies to the steady-state growth rate. Moreover, it does not hinge on particular assumptions on how aggregate savings come about. It holds for any household sector allowing savings to grow at the same rate as aggregate output.

Keywords: Capital Accumulation; Elasticity of Substitution; Direction of Technical Change; Neoclassical Growth Model (search for similar items in EconPapers)
Date: 2010-02-10
New Economics Papers: this item is included in nep-dge and nep-fdg
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Related works:
Journal Article: Steady-state growth and the elasticity of substitution (2011)
Working Paper: Steady-state growth and the elasticity of substitution (2011)
Working Paper: Steady-State Growth and the Elasticity of Substitution (2010)
Working Paper: Steady-State Growth and the Elasticity of Substitution (2010)
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