Extensive and Intensive Growth in a Neoclassical Framework

29 Pages Posted: 1 Apr 2004

See all articles by Andreas Irmen

Andreas Irmen

University of Luxembourg - Ceter for Research in Economic Analysis (CREA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research), Munich

Date Written: February 2004

Abstract

Extensive growth based on the expansion of inputs is likely to be subject to diminishing returns. Therefore, it is often viewed as having no effect on per capita magnitudes in the long run. This Paper argues that periods of extensive growth through capital accumulation may be a precursor to periods of intensive growth during which output per unit of input grows through endogenous technical change. Such a sequence of stages of development occurs as capital accumulation affects the incentives to engage in labour-saving technical change. A steady rise in the capital-labour ratio affects the relative scarcity of factors of production, their (expected) relative price, and induces innovation investments.

Keywords: Endogenous technical change, neoclassical growth model, induced innovation, productivity growth

JEL Classification: D24, J30, O33, O41

Suggested Citation

Irmen, Andreas, Extensive and Intensive Growth in a Neoclassical Framework (February 2004). CEPR Discussion Paper No. 4266. Available at SSRN: https://ssrn.com/abstract=515946

Andreas Irmen (Contact Author)

University of Luxembourg - Ceter for Research in Economic Analysis (CREA) ( email )

162a, avenue de la Faïencerie
Luxembourg, L – 1511
Luxembourg

HOME PAGE: http://wwwen.uni.lu/recherche/fdef/crea/people/andreas_irmen

CESifo (Center for Economic Studies and Ifo Institute for Economic Research), Munich

Poschinger Str. 5
Munich, DE-81679
Germany

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