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Knife-edge conditions in the modeling of long-run growth regularities

Growiec, Jakub (2008): Knife-edge conditions in the modeling of long-run growth regularities.

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Abstract

Balanced (exponential) growth cannot be generalized to a concept which would not require knife-edge conditions to be imposed on dynamic models. Already the assumption that a solution to a dynamical system (i.e. time path of an economy) satisfies a given functional regularity (e.g. quasi-arithmetic, logistic, etc.) imposes at least one knife-edge assumption on the considered model. Furthermore, it is always possible to find divergent and qualitative changes in dynamic behavior of the model – strong enough to invalidate its long-run predictions – if a certain parameter is infinitesimally manipulated. In this sense, dynamics of all growth models are fragile and "unstable".

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