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Bulletin of Monetary Economics and Banking

Document Type

Article

Abstract

This paper develops and discusses a neoclassical growth model with two inputs: physical capital stock and combined stock of human and intellectual capital. The production process is subject to diminishing returns to capital in perfect markets, in sharp contrast to new endogenous growth models that assume increasing returns to capital in imperfect markets. The model finds that a high saving rate raises both transitional and steady state growth rates of output through increases in physical, human, and intellectual investments that augment labor productivity—a key extension of the Solow (1956)-Swan (1956) growth model. Additionally, the paper derives an optimal rule for choosing the saving rate that maximizes consumer welfare. Implications for growth policies are drawn.

First Page

285

Last Page

312

Creative Commons License

Creative Commons Attribution-NonCommercial 4.0 International License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Philippines

Affiliation

Bangko Sentral ng Pilipinas

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