• Delano Segundo Villanueva Bangko Sentral ng Pilipinas
Keywords: Neoclassical growth, Human and intellectual capital, Growth policies



This paper develops and discusses a neoclassical growth model with two inputs: physical capital stock and combined stock of human and intellectual capital.  The production process is subject to diminishing returns to capital in perfect markets, in sharp contrast to new endogenous growth models that assume increasing returns to capital in imperfect markets.  The model finds that a high saving rate raises both transitional and steady state growth rates of output through increases in physical, human, and intellectual investments that augment labor productivity—a key extension of the Solow (1956)-Swan (1956) growth model.  Additionally, the paper derives an optimal rule for choosing the saving rate that maximizes consumer welfare.  Implications for growth policies are drawn.


Download data is not yet available.


Aghion, P., & Howitt, P. (1998). Endogenous Growth Theory. MIT Press, Cambridge, MA.

Arrow, K. (1962). The Economic Implications of Learning by Doing. Review of Economic Studies, 29, 155-73.

Bureau of Labor Statistics. (2020). Multifactor Productivity Trends, 1987-2019. March, U.S. Department of Labor.

CEIC. (2020). Ratio of Nominal Gross Capital Formation to Nominal GDP, Seasonally Adjusted Auxiliary Series, BEA, U.S. Department of Commerce.

Conlisk, J. (1967). A Modified Neoclassical Growth Model with Endogenous Technical Change. Southern Economic Journal. 34, 199-208.

Domar, E. (1946). Capital Expansion, Rate of Growth, and Employment. Econometrica, 14, 137-147.

Harrod, R. (1939). An Essay in Dynamic Theory. The Economic Journal, 49, 14-33.

IHS Markit (2019). The 5G Economy, How 5G Will Contribute to the Global Economy.

Inada, K. (1963). On a Two-Sector Model of Economic Growth: Comments and Generalization. Review of Economic Studies, 30, 119-127.

Knight, M., Loayza, N., & Villanueva, D. (1993). Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach. IMF Staff Papers, 40, 512-541.

Organization for Economic Cooperation and Development. (2020).

Phelps, E. (1966). Golden Rules of Economic Growth. WW Norton, NY, New York. Ramsey, F. (1928). A Mathematical Theory of Saving. Economic Journal, 38, 543– 559.

Rebelo, S. (1991). Long-Run Policy Analysis and Long-Run Growth. Journal of Political Economy, 99, 500-21.

Romer, P. (1986). Increasing Returns and Long-Run Growth. Journal of Political Economy, 94, 1002-37.

Solow, R. (1956). A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics,70, 65-94.

________(1991). Policies for Economic Growth. Sturc Memorial Lecture, Johns Hopkins University School of Advanced International Studies.

Swan, T. (1956). Economic Growth and Capital Accumulation. Economic Record, 32, 334-61.

Villanueva, D. (1994). Openness, Human Development, and Fiscal Policies: Effects on Economic Growth and Speed of Adjustment. IMF Staff Papers, 41, 1-29.

________ (2020). A Modified Neoclassical Growth Model with Endogenous Labor Participation. Bulletin of Monetary Economics and Banking, 23, 83-100.

________ (2021). Optimal Saving and Sustainable Foreign Debt. Philippine Review of Economics, forthcoming.

World Bank (2020). Government Expenditure on Education, Total—United States.

How to Cite
Villanueva, D. (2021). CAPITAL AND GROWTH. Buletin Ekonomi Moneter Dan Perbankan, 24(2), 285 - 312.