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(Un)Balanced Growth

Since the late 1800s, real output in the United States has been growing at a steady rate of about 3.5 percent per year (see Figure 1).1 With the exception of the 20 years between 1930 and 1950, the real aggregate capital stock of the United States has also been growing at that same steady rate. Thus, although output tripled and capital increased by a factor of 2.5 over this time period, the capital-output ratio remained roughly constant before 1930 and after 1950. Available data also indicate that the relative price of capital in terms of consumption goods has not changed much since the 1950s. In this article I review to what extent the stability of the aggregate capital accumulation ...

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