Abstract

The one-sector Solow–Ramsey model is the most popular model of longrun economic growth. This paper argues that a two-sector approach, in which technological progress in the production of durable goods exceeds that in the rest of the economy, provides a far better picture of the longrun behavior of the U.S. economy. The paper shows how to use the twosector approach to model the real chain-aggregated variables currently featured in the U.S. National Income and Product Accounts. It is shown that each of the major chain-aggregates—output, consumption, investment, and capital stock—will tend in the long run to grow at steady, but different, rates. Implications for empirical analysis based on these data are explored.

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Additional Information

ISSN
1538-4616
Print ISSN
0022-2879
Pages
pp. 627-656
Launched on MUSE
2003-07-17
Open Access
No
Archive Status
Archived 2007
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