0 2}, b = min Uim[f;/f;' - kJ, i = 1, 2}.
We assume that the output good serves as a medium of exchange and is taken as numeraire. We thus set P = 1 and measure both wages and rental flows in units of the output good. As we assume that factor markets work quickly enough so that our system always displays competitive equilibrium in factor markets, one always has: W = F K and R = F K. In order to obtain the complete growth model, we further make two assumptions. It is assumed that the labour force grows at a fixed relative rate 26 n independent of any economic variables in the system.
This model is completely self-contained and determined. The functions H are assumed to be continuous, homogeneous of degree one, and strictly increasing in each argument. A sequence X(t) is said to be a balanced growth path or a steady growth path if for some g (> 0) we have X(t+l) = gX(t), for any t. 7) The conditions for the existence and uniqueness of a balanced growth path are given in Nikaido (1968). 7. Production Functions in Growth Models In all of the models mentioned above, we use the concept of 'production function'.