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Endogenous Growth, Temporary Equilibrium, and the Direction of Change

Peter Funk ()

Discussion Paper Serie A from University of Bonn, Germany

Abstract: This article studies the long-run direction of technological change in an endogenous growth model. Development is modeled as a sequence of temporary equilibria in an overlapping generations framework. We introduce a concept of `long-run efficient development' which excludes persistent inefficiencies. The concept is much weaker than short-run or long-run Pareto-efficiency and does not depend on our particular model. The main theorem of the article gives conditions on agents' expectations and preferences and on the evolution of innovation possibilities under which equilibrium development, guided by current prices and profit expectations, is long-run efficient.

Keywords: Endogenous growth; direction of change; temporary general equilibrium; efficient development. (search for similar items in EconPapers)
JEL-codes: D50 D60 O12 O30 O33 (search for similar items in EconPapers)
Date: 1995-05
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