{"title":"Factor substitution, long-run equilibrium, and convergence speed in the Lucas model","authors":"Manuel A. Gómez","doi":"10.1016/j.econlet.2023.111358","DOIUrl":null,"url":null,"abstract":"<div><p>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.</p></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"232 ","pages":"Article 111358"},"PeriodicalIF":2.1000,"publicationDate":"2023-09-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economics Letters","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S016517652300383X","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
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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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Many economists today are concerned by the proliferation of journals and the concomitant labyrinth of research to be conquered in order to reach the specific information they require. To combat this tendency, Economics Letters has been conceived and designed outside the realm of the traditional economics journal. As a Letters Journal, it consists of concise communications (letters) that provide a means of rapid and efficient dissemination of new results, models and methods in all fields of economic research.
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