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Growth and multiple equilibria: A unique local dynamics

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  • Hosoya, Kei
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    Abstract

    The paper investigates the local dynamics of a simple growth model with a public health factor. A notable feature of the model is that it employs a non-separable utility function between consumption and the level of public health infrastructure (publicly provided health environment). In addition to the effects on utility, an increase in the public health level contributes to labor productivity growth. From a three-dimensional dynamic system that includes physical capital, public health infrastructure and consumption, our model is found to have multiple equilibria (dual steady states) if the deep parameters of the utility function satisfy certain conditions. Then, numerical computations demonstrate that each equilibrium exhibits local saddle-path stability. This result deserves careful attention, as it indicates that the economy experiences a relatively undiversified growth pattern when converging on high- and low-growth equilibria. Our striking result has important implications in the study of growth and development.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 29 (2012)
    Issue (Month): 5 ()
    Pages: 1662-1665

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    Handle: RePEc:eee:ecmode:v:29:y:2012:i:5:p:1662-1665

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Growth; Multiple equilibria; Local dynamics; Public health infrastructure;

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    1. Capolupo, Rosa, 2000. "Output Taxation, Human Capital and Growth," Manchester School, University of Manchester, vol. 68(2), pages 166-83, March.
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    4. Perez, Rafaela & Ruiz, Jesus, 2007. "Global and local indeterminacy and optimal environmental public policies in an economy with public abatement activities," Economic Modelling, Elsevier, vol. 24(3), pages 431-452, May.
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    10. Xavier Raurich, 2003. "Government Spending, Local Indeterminacy and Tax Structure," Economica, London School of Economics and Political Science, vol. 70(280), pages 639-653, November.
    11. Fernandez, Esther & Novales, Alfonso & Ruiz, Jesus, 2004. "Indeterminacy under non-separability of public consumption and leisure in the utility function," Economic Modelling, Elsevier, vol. 21(3), pages 409-428, May.
    12. Benhabib Jess & Perli Roberto, 1994. "Uniqueness and Indeterminacy: On the Dynamics of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 63(1), pages 113-142, June.
    13. Jess Benhabib & Qinglai Meng & Kazuo Nishimura, 2000. "Indeterminacy under Constant Returns to Scale in Multisector Economies," Econometrica, Econometric Society, vol. 68(6), pages 1541-1548, November.
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    Cited by:
    1. Gaspar, J. & Vasconcelos, P.B. & Afonso, O., 2014. "Economic growth and multiple equilibria: A critical note," Economic Modelling, Elsevier, vol. 36(C), pages 157-160.

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