Differential savings, factor shares, and endogenous growth cycles

Abstract The paper analyzes the dynamic properties of the neoclassical one-sector growth model with differential savings in the sense of Kaldor–Pasinetti. The economy exhibits unstable steady states and fluctuations if the income distribution varies sufficiently and if shareholders save more than workers. The paper analyzes in detail the dynamics for the case with a fixed proportions technology as well as with a smooth approximation. If the savings propensities differ by an arbitrarily small amount, the system exhibits topological chaos in the sense of Li and Yorke for an open set of production functions. The analytical results are supplemented by numerical experiments.