Is Harrod-neutrality Needed for Balanced Growth? Uzawa's Theorem Revisited

Defu Li (), Jiuli Huang and Ying Zhou

MPRA Paper from University Library of Munich, Germany

Abstract: Taking into account the adjustment costs of investment, this paper proves that it is not the neoclassical growth model itself but the specific form of capital accumulation function that requires technical change to exclusively be Harrod neutral in steady state. Uzawa’s(1961)steady-state growth theorem holds only when the marginal efficiency of capital accumulation is constant, which implies that the capital supply is infinitely elastic. Therefore, it is unnecessary to make strong assumptions about the shape of the production function and the direction of technical change for neoclassical growth model to exhibit steady-state growth.

Keywords: Neoclassical Growth Model; Uzawa’s Steady-state Growth Theorem; Direction of Technical Change; Adjustment Cost (search for similar items in EconPapers)
JEL-codes: E13 O33 O41 (search for similar items in EconPapers)
Date: 2014, Revised 2014-02
New Economics Papers: this item is included in nep-fdg, nep-ger, nep-gro and nep-mac
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