Balanced Growth Despite Uzawa
Gene M. Grossman, Elhanan Helpman, Ezra Oberfield, Thomas Sampson
American Economic Review · 2017 · Volume 107 · Issue 4
Abstract
The evidence for the United States points to balanced growth despite falling investment good prices and a 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 the introduction of 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 present a class of aggregate production functions for which a neoclassical growth model with capital-augmenting technological progress and endogenous schooling converges to a balanced growth path.
Keywords
Investment, Capital, Intangible Capital, Capacity, Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital, Aggregate Labor Productivity, Returns to Education, Human Capital, Skills, Occupational Choice, Labor Productivity, Technological Change: Choices and Consequences, Diffusion Processes, One, Two, and Multisector Growth Models, Empirical Studies of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
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