Walrasian General Equilibrium Allocations and Dynamics in Two-Sector Growth Models

Abstract

This paper analyzes and solves miniature Walrasian general equilibrium systems of momentary and moving equilibria. The Walrasian framework encompasses the fundamental neoclassical and classical two-sector growth models; the families of solutions of steady-state and persistent growth per capita in various competitive two-sector economies are parametrically characterized. Moreover, the endogenous behavior of relative prices and the sectoral allocation of primary factors are analyzed in detail. The technology parameters of the capital good industry are decisive for obtaining long-run per capita growth in closed (global) economies. A review of the literature complements the theorems on the general equilibrium allocations, dynamic systems, and the time paths of Walrasian two-sector economies.