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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26192
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| Title: | | Factor substitution, income distribution, and growth in a generalized neoclassical model  |
| Authors: | | Irmen, Andreas Klump, Rainer |
| Issue Date: | | 2007 |
| Series/Report no.: | | CESifo working paper 2148 |
| Abstract: | | We analyze a generalized neoclassical growth model that combines a normalized CES production function and possible asymmetries of savings out of factor incomes. This generalized model helps to shed new light on a recent debate concerning the impact of factor substitution and income distribution on economic growth. We can show that this impact relies on both an efficiency and an acceleration effect, where the latter is caused by the distributional consequences of an increase in the elasticity of substitution. While the efficiency effect is always positive, the direction of the acceleration effect depends on the particular savings hypothesis. However, if savings out of capital income are substantial so that a certain threshold value is surpassed we find that the efficiency effect dominates and higher factor substitution can work as a major engine of growth. |
| Subjects: | | capital accumulation elasticity of substitution income distribution neoclassical growth model |
| JEL: | | E21 O11 O41 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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