Endogenous technical change with externalities in a classical growth model

A growth model with three inputs (capital, labor, and land) extends Foley and Michl's [D. Foley, T.R. Michl's, Growth and Distribution, Harvard University Press, Cambridge, MA, 1999] classical accumulation model by adding a Goodwin [R. Goodwin, A growth cycle, in: C.H. Feinstein (Ed.), Socialism, Capitalism and Economic Growth, Cambridge University Press, Cambridge, 1967] labor market and a model of endogenous technical change that can represent either Dumenil and Levy's [Metroeconomica 46 (1995) 213; J. Econ. Behav. Org., this issue] or Kennedy's [Econ. J. 74 (295) (1964) 541] models. When land is priced, there is a stable steady-state growth path with desirable allocational properties. When land is not priced, no steady state exists and the growth path leads to a catastrophe. These results hold when the elasticity of substitution between capital and labor is less than unity. (C) 2003 Elsevier Science B.V. All rights reserved.