Capital Growth Paths of the Neoclassical Growth Model

Abstract

This paper derives the first-order approximated paths of both types of capital in the two-capital neoclassical growth model. The derived capital growth paths reveal that the short-run growth effect of capital injection differs considerably depending on which type of capital is enhanced. This result demonstrates the importance of well-targeted capital enhancement programs such as public sector projects and foreign aid. © 2012 Taro Takahashi.