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| Author: | Papageorgiou, C. Saam, M. |
| Title: | Two-level CES production technology in the Solow and Diamond growth models |
| Journal: | Scandinavian Journal of Economics
2008 : VOL. 110:1, p. 119-143 |
| Index terms: | production technology growth models |
| Language: | eng |
| Abstract: | This paper examines the theoretical properties of a production technology, establishing existence and stability conditions of steady states (hereafter as: st-st./st-sts.) under the Solow (here as: S.) and Diamond (as: D.) growth models. It is shown that in the S. model the sufficient condition for a st-st. is fulfilled for a wide range of substitution (as: substn.) parameter values. This is in sharp contrast with the two-factor S. model. In the D. model, multiple equilibria can occur when the aggregate elasticity of substn. is lower than the capital share. In addition, it is shown that for high initial levels of capital and factor substitutability, the effect of a further increase in a substn. parameter on the st-st. depends on capital-skill complementarity. |
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