Postprint version. Published in Journal of Economic Theory, Volume 56, Issue 1, October 1, 1992, pages 77-92. Copyright © 1992 Elsevier. The definitive version is available at http://dx.doi.org/10.1016/0022-0531(92)90102-N.
NOTE: At the time of publication, the author Eric Fisher was not yet affiliated with Cal Poly.
This paper analyzes endogenous economic growth in the model of overlapping generations. There is no bequest motive, nor are there any externalities. If the technology is convex, per capita growth can occur only if the economy has at least two sectors. This paper shows that the limiting marginal efficiency of investment determines the potential for growth and that the rate of growth depends upon the share of the capital stock devoted to investment. Sustained consumption growth can occur only under a fairly restrictive set of assumptions. There is an equilibrium with growth only if the marginal propensity to save is sufficiently high.