American Economic Review Vol. 107 No. 4 2017

Balanced Growth Despite Uzawa

Gene M. Grossman¹; Elhanan Helpman²; Ezra Oberfield¹; Thomas Sampson³

¹ Department of Economics, Princeton University, Princeton, NJ 08544 (e-mail: ) · ² Harvard University, 1805 Cambridge Street, Cambridge, MA 02138, and CIFAR (e-mail: ) · ³ London School of Economics, Centre for Economic Performance, Houghton Street, London, WC2A 2AE, United Kingdom (e-mail: )

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.

DOI

10.1257/aer.20151739

Volume

107

Issue

4

Pages

1293-1312

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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