Abstract
We study the discrete time neoclassical one-sector growth model with differential savings while assuming Kadiyala production function which shows a variable elasticity of substitution symmetric with respect to capital and labor. We show that, if workers save more than shareholders, then the growth path is bounded from above and the boundary is independent from the savings rate of shareholders. Moreover, the growth path for non-developed countries is influenced only by the savings rate of shareholders while level of capital per capita of developed economies is influenced by the savings rate of workers. We also show that multistability phenomena may occur so that the model is able to explain co-existence of under-developed, developing and developed economies. We prove that fluctuations and complex dynamics may arise when the elasticity of substitution between production factors is lower than one and shareholders save more than workers.
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