This paper provides a unified approach to characterizing the relation between factor substitution and economic growth in different one-sector growth models (namely, the Solow, Ramsey, and Diamond models). Our main finding is that if better factor substitution raises savings in the steady state,...

By endowing his agents with simple forecasting models, or <italic>representations</italic>, M. Woodford (“Learning to Believe in Sunspots,” <italic>Econometrica</italic> 58, 277–307, 1990) found that finite state Markov sunspot equilibria may be stable under learning. We show that common factor representations generalize...