Long-Run Positions and Short-Run Dynamics in a Classical Growth Model
Abstract
The aim of this paper is to study the qualitative impact of short-run disequilibria on long-run positions. In this perspective, we refer to a classical framework. We underline that one-sector classical growth models only deal with perfectly adjusted situations (steady-state equilibria). Such models assume that short-run dynamics are neutral in the long run which means that the steady state is defined independently of the transient dynamics. In order to show that this situation is not always realized, we propose a modified version of Kurz's growth model (“Technical change, growth and distribution: a steady-state approach to ‘unsteady’ growth”, in Kurz H. D.: Capital Distribution and Effective Demand, Blackwell, Oxford, 1990, pp. 210–239) that integrates short-run disequilibria. We obtain dynamics that exhibit a multiplicity of equilibria. Therefore, short-run events can no longer be neglected, since they contribute to the emergence of the long-run equilibrium.