ABSTRACT
We analyzed neoclassical economic growth models in the preceding chapters, assuming that the production process is characterized by constant returns to scale (i.e. when the production function is homogeneous of degree 1). In this chapter, we will depart from that assumption and analyze the long-run equilibrium in those models when the economy is affected by decreasing or increasing returns to scale (the degree of homogeneity of the production function will be higher or less than 1).
