A Note on Balanced Growth with a less than unitary Elasticity of Substitution

Miguel Leon-Ledesma and Mathan Satchi

Studies in Economics from School of Economics, University of Kent

Abstract: We present a simple production technology in which the choice of production technique results in a balanced growth path even in the presence of capital-augmenting technical progress. Given a particular choice of technique, the production function is CES with a less than unitary elasticity of factor substitution. The form of this production technology is also invariant to the choice of units, allowing us to abstract from the normalization considerations that often accompany the use of CES. The approach yields a balanced growth path but short-run time-varying factor shares without requiring an explicit model of the R&D sector.

Keywords: Balanced growth; capital-augmenting technical progress; measurement units; elasticity of substitution (search for similar items in EconPapers)
JEL-codes: E25 O33 O40 (search for similar items in EconPapers)
Date: 2010-08
New Economics Papers: this item is included in nep-dge and nep-fdg
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Citations: View citations in EconPapers (4)

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