NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The (Interesting) Dynamic Properties of the Neoclassical Growth Model with CES Production

Kent Smetters

NBER Technical Working Paper No. 290
Issued in March 2003
NBER Program(s):   TWP

Despite being the standard growth model for several decades, little is actually known analytically about the dynamic properties of the neoclassical Ramsey-Cass-Koopmans growth model. This paper derives analytically the properties of the endogenous saving rate when technology takes the Constant Elasticity of Substitution (CES) form. For a factor substitution elasticity between capital and labor less than unity, the saving rate decreases along the transition path after the capital stock reaches a critical value identified analytically herein. But before reaching this critical value, the saving rate might increase and so, taken as a whole, the saving rate path might manifest overshooting.' Similarly, for a factor substitution elasticity greater than unity, the saving rate increases along the transition path after the capital stock reaches a critical value. Before reaching this critical value, the saving rate might decrease and so the saving rate path might manifest undershooting.' A simulation illustrating these interesting dynamics is presented.

download in pdf format
   (898 K)

email paper

This paper is available as PDF (898 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/t0290

Published: Smetters, Kent. "The (Interesting) Dynamic Properties Of The Neoclassical Growth Model With CES Production," Review of Economic Dynamics, 2003, v6(2,Apr), 697-707.

Users who downloaded this paper also downloaded these:
Bernanke and Gurkaynak Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously
Bajona and Kehoe w12567 Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us