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Factor Substitution, Long-Run Equilibrium, and Convergence Speed in the Lucas Model

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URI: http://hdl.handle.net/2183/38747
DOI: https://doi.org/10.1016/j.econlet.2023.111358

Publication date

2023

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Bibliographic citation

Gómez, M. A. (2023). Factor substitution, long-run equilibrium, and convergence speed in the Lucas model. Economics Letters, 232, 111358. 10.1016/j.econlet.2023.111358

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Abstract

[Abstract] We study the effect of factor substitution on long-run equilibrium in the Lucas model with CES production. The long-run growth rate does not depend on the elasticity of substitution. However, there is a negative (positive) relationship between the elasticity of factor substitution and the convergence speed if the baseline ratio of physical capital to effective labor is below (above) its steady-state value.

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Financiado para publicación en acceso aberto: Universidade da Coruña/CISUG

Keywords

Elasticity of substitution Endogenous growth Convergence speed Human capital

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https://doi.org/10.1016/j.econlet.2023.111358

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Atribución-NoComercial 4.0 Internacional (CC BY-NC)

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Atribución-NoComercial 4.0 Internacional (CC BY-NC)

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