The Plosser Fact and Other Growth Effects of Savings Rate

The first decisive piece of evidence
  • Arvid Aulin
Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 464)


We shall study in this chapter how the generalized value function affects the growth of variables connected to the labour input E on the balanced-growth path. The Plosser fact 7 states the positive effect of savings rate on the growth of output per worker Y/E, while no similar effect exists in the case of output or employment. This will be theoretically reproduced, and the effects of savings rate on the growth of output and employment will be analysed. The Plosser effect, with a positive effect on Y/E and an absence of it for Y or E, is a puzzle in growth theories. The solution given here is based on the extraordinary connections, which in this theory exists between the net savings rate and the level of output per worker, output and employment.


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Copyright information

© Springer-Verlag Berlin Heidelberg 1998

Authors and Affiliations

  • Arvid Aulin
    • 1
  1. 1.The Finnish Academy of Science and LettersHelsinkiFinland

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