Balanced Growth Despite Uzawa

56 Pages Posted: 12 Jan 2016

See all articles by Gene M. Grossman

Gene M. Grossman

Princeton University - Woodrow Wilson School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Elhanan Helpman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Ezra Oberfield

Princeton University

Thomas Sampson

Harvard University

Multiple version iconThere are 3 versions of this paper

Date Written: January 2016

Abstract

The evidence for the United States points to balanced growth despite falling investment-good prices and an elasticity of substitution between capital and labor less than one. This is inconsistent with the Uzawa Growth Theorem. We extend Uzawa's theorem to show that the introduction of human capital accumulation in the standard way does not resolve the puzzle. However, balanced growth is possible if schooling is endogenous and capital is more complementary with schooling than with raw labor. We describe balanced growth paths for a variety of neoclassical growth models with capital-augmenting technological progress and endogenous schooling. The balanced growth path in an overlapping-generations model in which individuals choose the duration of their education matches key features of the U.S. economic record.

Suggested Citation

Grossman, Gene M. and Helpman, Elhanan and Oberfield, Ezra and Sampson, Thomas, Balanced Growth Despite Uzawa (January 2016). NBER Working Paper No. w21861. Available at SSRN: https://ssrn.com/abstract=2713586

Gene M. Grossman (Contact Author)

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

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Princeton University - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Elhanan Helpman

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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Ezra Oberfield

Princeton University ( email )

Princeton, NJ 08544-1021
United States

Thomas Sampson

Harvard University ( email )

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Cambridge, MA 02138
United States

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