Factor substitution and long-run growth in the Lucas model with elastic labor supply

- I examine the link between factor substitution and endogenous long-run growth.
- I use the Lucas model with physical and human capital and elastic labor supply.
- Positive link if the baseline capital-effective labor ratio is above its steady state.
- The relationship is negative otherwise.

We show that there exists a positive (resp., negative) relationship between the elasticity of factor substitution and long-run growth if the baseline ratio of physical capital to effective labor is above (resp., below) its steady-state value in the Lucas model with elastic labor supply.