An Endogenously Derived AK-model of Economic Growth

Jensen, Christian (2013): An Endogenously Derived AK-model of Economic Growth.

Abstract

Assuming a production process with returns to scale that vary with the intensity it is operated at, an AK-model of endogenous growth with constant returns to scale in production is shown to arise due to replication driven by profit-maximization. If replication occurs at the efficiency-maximizing scale, the result applies also when the number of production processes must be discrete, thus overcoming the so-called integer problem. When competition is imperfect, there is only convergence toward the AK-model for large enough input use, so an economy is more prone to stalling in a steady-state without growth, the smaller and less competitive it is. Inefficient scaling also raises the risk of stalling.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic growth; AK-model; Replication; Returns to scale in production; Integer problem
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General

References

Acemoglu, D. (2008), Introduction to Modern Economic Growth, Princeton University Press.

Aghion, P. and Howitt, P. (1992), ``A Model of Growth through Creative Destruction,'' Econometrica 60: 323-351.

Dasgupta P. and Stiglitz, J. (1980), ``Uncertainty, Industrial Structure, and the Speed of R&D,'' Bell Journal of Economics 11: 1-28.

Edgeworth, F. Y., (1911), ``Contributions to the Theory of Railway Rates,'' Economic Journal 21: 346-371 and 551-571.

Griliches, Z. and Schmookler (1963), ``Inventing and Maximizing,'' American Economic Review 53: 725-729.

Grossman, G. M. and Helpman, E. (1991a), ``Quality Ladders in the Theory of Growth,'' Review of Economic Studies 68: 43-61.

Grossman, G. M. and Helpman, E. (1991b), Innovation and Growth in the Global Economy, MIT Press.

Hicks, J. (1939), Value and Capital: An inquiry into some fundamental principles of economic theory, Clarendon Press.

Jones, C. I. (1999), ``Growth: With or Without Scale Effects?'' American Economic Review 89: 139-144.

Jones, C. I. (2005), ``Growth and Ideas'' in Aghion, A. and Durlauf, S. (Eds) Handbook of Economic Growth, Elsevier.

Kaldor, N. (1934), ``The Equilibrium of the Firm,'' Economic Journal 44: 60-76.

Kaldor, N. (1963), ``Capital Accumulation and Economic Growth'' in Lutz F. A. and Hauge, D. C. (Eds) Proceedings of a Conference Held By the International Economics Association, Macmillian.

Koopmans, T. C. (1957), Three Essays on the State of Economic Science, McGraw-Hill.

Lerner, A. P. (1944), The Economics of Control: Principles of Welfare Economics, Macmillan.

Lucas, R. E. (1988), ``On the Mechanics of Economic Development,'' Journal of Monetary Economics 22: 3-42.

Marshall A. (1890), Principles of Economics: An Introductory Volume, Macmillan.

McCallum, B. T. (1996), ``Neoclassical Vs. Endogenous Growth Analysis: An Overview,'' Federal Reserve Bank of Richmond Economic Quarterly 82: 41-71.

Rebelo, S. (1991), ``Long-Run Policy Analysis and Long-Run Growth,'' Journal of Political Economy 99: 500-521.

Rivera-Batiz, L. A. and Romer, P. M. (1991), ``Economic Integration and Endogenous Growth,'' Quarterly Journal of Economics 106: 531-555.

Romer, P. M. (1986), ``Increasing Returns and Long-Run Growth,'' Journal of Political Economy 94: 1002-37.

Romer, P. M. (1990), ``Endogenous Technological Change,'' Journal of Political Economy 90: S71-102.

Romer, P. M. (1993), ``Idea Gaps and Object Gaps in Economic Development,'' Journal of Monetary Economics 32: 543-573.

Romer, P. M. (1994), ``The Origins of Endogenous Growth,'' Journal of Economic Perspectives 8: 3-22.

Schmookler, J. (1966) Invention and Economic Growth, Harvard University Press.

Schumpeter, J. A. (1934), The Theory of Economic Development, Harvard University Press.

Shell, K. (1966), ``Toward a Theory of Inventive Activity and Capital Accumulation,'' American Economic Review 56: 62-68.

Solow, R. M. (1956), ``A Contribution to the Theory of Economic Growth,'' Quarterly Journal of Economics 70: 65-94.

Sydsaeter, K., Strom, A. and Berck, P. (1991), Economists' Mathematical Manual, Springer.

Wicksell, K. (1934), Lectures on Political Economy I, Routledge & Sons.