THE THEORY OF GROWTH. A WALRASIAN GROWTH MODEL.
Technical rept. no. 129,
STANFORD UNIV CALIF INST FOR MATHEMATICAL STUDIES IN THE SOCIAL SCIENCES
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The Walrasian model of economic growth is examined. Initially a two-sectoral mathematical model is assumed. It is further assumed that the economy consists of many firms classified into two industries there is no possibility of joint production and a finite number of discrete manufacturing processes are available to each industry. It is shown that there is a short-run growth rate equilibrium corresponding to any given positive amounts of capital and labor. The proposition that a series of short-run equilibria, starting from an arbitrarily given capital-labor endowment, will eventually approach the state of the long-run equilibrium. In the long-run equilibrium prices remain unchanged and the stock of capital, the labor-force, and the outputs of the two industries grow forever at a constant, common rate. The theory is then generalized to include a multisectoral model.