On the Dynamics of Economic Growth

34 Pages Posted: 15 Feb 2006

Date Written: November 1994


This paper examines the dynamics of economic growth. First, it demonstrates that the standard neoclassical growth model with constant elasticity of intertemporal substitution is not consistent with the patterns of development we observe in the real world, once we consider the initial conditions. Second, it examines an alternative growth model, which is consistent with endogenously determined initial conditions and also generates dynamics that are in accord with the historical patterns of growth rates, capital flows, savings rates and labor supply. The alternative model is a generalized version of the neoclassical growth model, with increasing rates of intertemporal substitution due to a Stone-Geary type of utility.

JEL Classification: O11, O41

Suggested Citation

Sarel, Michael, On the Dynamics of Economic Growth (November 1994). IMF Working Paper No. 94/138, Available at SSRN: https://ssrn.com/abstract=883896

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