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From Stability To Growth In Neoclassical Multisector Models

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Executive Summary

Analysis of the multisector models was an important strand of inquiry within neoclassic growth theory from the early 1960s onwards, and it had two main purposes. From a theoretical point of view, it sought to determine whether the properties of the Solow model - in particular, the stability of the equilibrium path - were maintained also in an economy with several sectors and many capital goods. Secondly, the neoclassical authors endeavoured to give greater realism to growth theory by abandoning the simplistic hypothesis of a single-sector economy. At the end of the 1960s, the multisector approach constituted one of the most promising areas of inquiry within growth theory as a whole, both in the neoclassical and other strands of research (Wan, 1971).

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