Inada conditions

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In macroeconomics, the Inada conditions, named after Japanese economist Ken-Ichi Inada,[1] are assumptions about the shape of a production function that guarantee the stability of an economic growth path in a neoclassical growth model. The conditions as such had been introduced by Hirofumi Uzawa.[2]

The six conditions for a given function are:

  1. the value of the function at 0 is 0:
  2. the function is continuously differentiable,
  3. the function is strictly increasing in : ,
  4. the second derivative of the function is negative in (thus the function is concave): ,
  5. the limit of the first derivative is positive infinity as approaches 0: ,
  6. the limit of the first derivative is zero as approaches positive infinity:

All these conditions are met by a Cobb–Douglas production function.

References[edit]

  1. ^ Inada, Ken-Ichi (1963). "On a Two-Sector Model of Economic Growth: Comments and a Generalization". The Review of Economic Studies 30 (2): 119–127. JSTOR 2295809. 
  2. ^ Uzawa, H. (1963). "On a Two-Sector Model of Economic Growth II". The Review of Economic Studies 30 (2): 105–118. JSTOR 2295808. 

Further reading[edit]