James Tobin and Growth Theory: Financial Factors and Long-Run Growth

Although Tobin 1955 was one of the founding papers of the neoclassical one-sector growth model with smooth substitution between capital and labor, James Tobin's contributions to long-run growth theory throughout his career stood apart from other neoclassical growth models because of his emphasis on portfolio substitution between money and capital as a possible source of the non-neutrality of money even in the long run. This paper examines Tobin's contributions to growth theory over more than four decades and the relationship of his work to the evolution of modern growth economics.