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DYNAMICS OF THE SAVING RATE IN THE NEOCLASSICAL GROWTH MODEL WITH CES PRODUCTION

Published online by Cambridge University Press:  01 April 2008

MANUEL A. GÓMEZ
MANUEL A. GÓMEZ*
Affiliation:
University of A Coruña
*
Address correspondence to: Manuel A. Gómez Suárez, Department of Applied Economics II, Facultad de Ciencias Económicas y Empresariales, Campus de Elviña, 15071 A Coruña, Spain; e-mail: mago@udc.es.
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Abstract

This paper characterizes the global dynamics of the saving rate in the neoclassical growth model with CES production. The study is based on qualitative phase-diagram analysis. The analytical conditions characterizing the cases that may arise theoretically depending on the parameters' configuration are obtained. It is well known that the saving rate behaves monotonically if technology is Cobb-Douglas. However, when the elasticity of substitution is nonunitary, the saving rate path may exhibit nonmonotonic behavior.

Keywords

Economic GrowthSavingCES Production

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Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 12 , Issue 2 , April 2008 , pp. 195 - 210
Copyright
Copyright © Cambridge University Press 2008

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