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Balanced growth despite Uzawa

Author

Listed:
  • Gene M. Grossman
  • Elhanan Helpman
  • Ezra Oberfield
  • Thomas Sampson
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.

Suggested Citation

  • Gene M. Grossman & Elhanan Helpman & Ezra Oberfield & Thomas Sampson, 2016. "Balanced growth despite Uzawa," CEP Discussion Papers dp1403, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1403
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    References listed on IDEAS

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    More about this item

    Keywords

    Demand; neoclassical growth; balanced growth; technological progress; capital-skill complementarity;
    All these keywords.

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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