Balanced Growth Despite Uzawa

56 Pages Posted: 22 Mar 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: February 29, 2016

Abstract

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

Keywords: neoclassical growth, balanced growth, technological progress, capital-skill complementarity

JEL Classification: O410

Suggested Citation

Grossman, Gene M. and Helpman, Elhanan and Oberfield, Ezra and Sampson, Thomas, Balanced Growth Despite Uzawa (February 29, 2016). CESifo Working Paper Series No. 5774. Available at SSRN: https://ssrn.com/abstract=2752865

Gene M. Grossman

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 (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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