FACTOR SUBSTITUTION,MECHANIZATION, AND ECONOMIC GROWTH |
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| Authors: | HIDEKI NAKAMURA |
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| Institution: | 1. Osaka City University;2. I would like to express my appreciation to Masakatsu Nakamura for the discussions that provided invaluable help in compiling the paper. I also would like to thank Kazumi Asako, Etsuro Shioji, and Mario Oshima for their comments. A referee provided helpful suggestions for improving the paper. |
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| Abstract: | This paper tries to explain the polarization of economic growth through mechanization. We derive a complementary relationship between capital accumulation and mechanization. While we assume an external effect that occurs as a result of mechanization, given the external effect, mechanization yields a constant‐elasticity‐of‐substitution production function in which the elasticity‐of‐substitution is greater than unity as the envelope of Cobb–Douglas production functions. When mechanization is difficult, which implies a low value for the elasticity‐of‐substitution, and the external effect is weak, there is potential for multiple steady states to exist. |
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| Keywords: | O14 O33 O40 |
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