Hostname: page-component-586b7cd67f-dlnhk Total loading time: 0 Render date: 2024-11-23T23:53:36.642Z Has data issue: false hasContentIssue false
  • English
  • Français

DYNAMICS OF THE SAVING RATE IN THE NEOCLASSICAL GROWTH MODEL WITH CES PRODUCTION

Published online by Cambridge University Press:  01 April 2008

MANUEL A. GÓMEZ
MANUEL A. GÓMEZ*
Affiliation:
University of A Coruña
*
Address correspondence to: Manuel A. Gómez Suárez, Department of Applied Economics II, Facultad de Ciencias Económicas y Empresariales, Campus de Elviña, 15071 A Coruña, Spain; e-mail: mago@udc.es.
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper characterizes the global dynamics of the saving rate in the neoclassical growth model with CES production. The study is based on qualitative phase-diagram analysis. The analytical conditions characterizing the cases that may arise theoretically depending on the parameters' configuration are obtained. It is well known that the saving rate behaves monotonically if technology is Cobb-Douglas. However, when the elasticity of substitution is nonunitary, the saving rate path may exhibit nonmonotonic behavior.

Keywords

Economic GrowthSavingCES Production
Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 12 , Issue 2 , April 2008 , pp. 195 - 210
Copyright
Copyright © Cambridge University Press 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Acemoglu, D. (2003) Labor- and capital-augmenting technical change. Journal of the European Economic Association 1, 1–37.CrossRefGoogle Scholar
Antràs, P. (2004) Is the U.S. aggregate production function Cobb-Douglas? New estimates of the elasticity of substitution. Contributions to Macroeconomics 4:1, Article 4.CrossRefGoogle Scholar
Arrow, K.J. and Kurz, M. (1970) Optimal growth with irreversible investment in a Ramsey model. Econometrica 38, 331–344.CrossRefGoogle Scholar
Azariadis, C. (1996) The economics of poverty traps—Part one: Complete markets. Journal of Economic Growth 1, 449–486.CrossRefGoogle Scholar
Barro, R.J. and Sala-i-Martin, X. (1995) Economic Growth. New York: McGraw-Hill.Google Scholar
Bentolila, S. and Saint-Paul, G. (2003) Explaining movements in the labor share. Contributions to Macroeconomics 3:1, Article 9.CrossRefGoogle Scholar
Blanchard, O.J. (1997) The medium run. Brookings Papers in Economic Activity 2, 89–158.CrossRefGoogle Scholar
Caselli, F. (2005) Accounting for cross-country income differences. In Aghion, P. and Durlauf, S.N. (eds.), Handbook of Economic Growth, pp. 679–741. Amsterdam: Elsevier.Google Scholar
Cass, D. (1965) Optimum growth in an aggregate model of capital accumulation. Review of Economic Studies 32, 233–240.CrossRefGoogle Scholar
Chirinko, R.S. (2002) Corporate taxation, capital formation, and the substitution elasticity between labor and capital. National Tax Journal 55, 339–355.CrossRefGoogle Scholar
Diamond, P.A. (1965) National debt in a neoclassical growth model. American Economic Review 55, 1126–1150.Google Scholar
Duffy, J. and Papageorgiou, C. (2000) A cross-country empirical investigation of the aggregate production function specification. Journal of Economic Growth 5, 87–120.CrossRefGoogle Scholar
Klump, R. and de La Grandville, O. (2000) Economic growth and the elasticity of substitution: Two theorems and some suggestions. American Economic Review 90, 282–291.CrossRefGoogle Scholar
Klump, R., Mc Adam, P. and Willman, A. (in press) Factor substitution and factor augmenting technical progress in the U.S.: A normalized supply-side system approach. Review of Economics and Statistics.Google Scholar
Koopmans, T.C. (1965) On the concept of optimal economic growth. Pontificiae Academiae Scientiarum Scripta Varia 28, 225–300.Google Scholar
Loayza, N., Schmidt-Hebbel, K. and Servén, L. (2000) Saving in developing countries: An overview. World Bank Economic Review 14, 393–414.CrossRefGoogle Scholar
Masanjala, W. and Papageorgiou, C. (2004) The Solow model with CES technology: Nonlinearities and parameter heterogeneity. Journal of Applied Econometrics 19, 171–201.CrossRefGoogle Scholar
Miyagiwa, K. and Papageorgiou, C. (2003) Elasticity of substitution and growth: Normalized CES in the Diamond model. Economic Theory 21, 155–165.CrossRefGoogle Scholar
Nishimura, K. and Venditti, A. (2004) Indeterminacy and the role of factor substitutability. Macroeconomic Dynamics 8, 436–465.CrossRefGoogle Scholar
Pitchford, J. (1960) Growth and the elasticity of substitution. Economic Record 36, 491–503.CrossRefGoogle Scholar
Ramsey, F. (1928) A mathematical theory of saving. Economic Journal 38, 543–559.CrossRefGoogle Scholar
Schmidt-Hebbel, K., Servén, L., and Solimano, A. (1996) Savings and investment: Paradigms, puzzles, policies. The World Bank Research Observer 11, 87–117.CrossRefGoogle Scholar
Smetters, K. (2003) The (interesting) dynamic properties of the neoclassical growth model with CES production. Review of Economic Dynamics 6, 697–707.CrossRefGoogle Scholar
Solow, R.M. (1956) A contribution to the theory of economic growth. Quarterly Journal of Economics 70, 65–94.CrossRefGoogle Scholar
Turnovsky, S.J. (2002) Intertemporal and intratemporal substitution, and the speed of convergence in the neoclassical growth model. Journal of Economic Dynamics and Control 26, 1765–1785.CrossRefGoogle Scholar
Zuleta, H. (2004) A note on scale effects. Review of Economic Dynamics 7, 237–242.CrossRefGoogle Scholar