A note on bounded growth with CES functions

Abstract

Constant elasticity of substitution (CES) functions with high capital-labor complementarity have been increasingly used to model macroeconomic phenomena.  This note discusses some peculiarities of growth in this setting that are usually neglected in the literature. It shows that, if the elasticity of substitution is below one, neoclassical growth with Harrod-neutral technical change is bounded by the savings rate and may converge towards a unitary capital share. Not included in Solow's original contribution, these results remain largely unknown.

Keywords: Neoclassical growth, Balanced growth, CES functions, Long-term economic growth