The Balanced Growth Frontier

Abstract

Suppose the time path of non-produced goods satisfies

$$c{a_t} = \left({1 + \lambda} \right)c{a_{t - 1}}$$

(4.1.1)

for all t, e.g. a proportional expansion of the supplies of all non-produced goods. Here λ will be a fairly small positive¹ number, say λ =0.05 for 5% growth. We assume that the model satisfies the requirement of limitation even without considering any limits on produced capital goods, e.g. to any vector car corresponds a limiting frontier of final output vectors, which could not be surpassed due to the limited availability of non-produced goods, even if an infinite stock of all capital goods were available.