On Returns to Scale Assumption in Endogenous Growth
Keywords:
returns to scale, endogenous growth, steady-state, balanced growth, long-run equilibrium.Abstract
This study points out to a contradiction between increasing returns to scale assumption and steady-state or long-run equilibrium or balanced growth analysis in models of endogenous growth. The paper reminds the necessity of the constant returns to scale assumption in models of economic growth, with special reference to models of endogenous growth, which are based on steady-state or long-run equilibrium or balanced growth. While analyzing balanced growth, some models of endogenous growth are based on increasing returns to scale but some others are based on constant returns to scale.
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