Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7372641 | Mathematical Social Sciences | 2018 | 9 Pages |
Abstract
We study the link between the elasticity of factor substitution and economic growth in the Ramsey-Cass-Koopmans model with elastic labor supply and normalized CES production. If the baseline value of capital per unit of effective labor is below its steady-state value, an increase in the elasticity of substitution generates a higher steady-state income, capital and consumption per capita. This is due to the combination of a positive efficiency effect of a higher elasticity of substitution and a positive distribution effect. However, the effect of a higher elasticity of substitution on these variables along the transition is ambiguous.
Related Topics
Physical Sciences and Engineering
Mathematics
Applied Mathematics
Authors
Manuel A. Gómez,