Our aim in this paper is to exposit a convex model of equilibrium growth. The model is strictly in
the Solow tradition. The model has two features which distinguish it from most other work on the
subject. These are, first, that the model is convex on the technological side and, second, that fixed
fatten are explicitly included. The difference between our model and the standard single sector
growth model lies in the fact that the marginal product of capital does not converge to zero as
the level of inputs go to infinity. Existence and characterization results are provided along with
some preliminary analyses of taxation and international trade policies. It is shown that the long-run
growth rate in per capita consumption depends, in the natural way, on the parameters describing
tastes and technology. Finally, it is shown that some policies have growth effects while others affect
only levels. It is demonstrated that in a free trade equilibrium with taxation national growth rates
of consumption and output need not converge.
*Published:
Journal of Political Economy Volume 98, Part 1, No. 5, October 1990, pp. 1008-1038
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