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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.
Publication Date: Apr-2017
Citation: Grossman, Gene M, Helpman, Elhanan, Oberfield, Ezra, Sampson, Thomas. (2017). Balanced Growth Despite Uzawa. American Economic Review, 107 (4), 1293 - 1312. doi:10.1257/aer.20151739
DOI: doi:10.1257/aer.20151739
ISSN: 0002-8282
Pages: 1293 - 1312
Type of Material: Journal Article
Journal/Proceeding Title: American Economic Review
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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