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Poverty trap and global indeterminacy in a growth model with open-access natural resources

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  • Antoci, Angelo
  • Galeotti, Marcello
  • Russu, Paolo

Abstract

In this paper we use global analysis techniques to analyze an economic growth model with environmental negative externalities, giving rise to a three-dimensional dynamic system (the framework is the one introduced by Wirl (1997) [53]). The dynamics of our model admits a locally attracting stationary state , which is, in fact, a poverty trap, coexisting with another stationary state possessing saddle-point stability. Global dynamical analysis shows that, under some conditions on the parameters, if the initial values of the state variables are close enough to the coordinates of , then there exists a continuum of equilibrium trajectories approaching and one trajectory approaching . Therefore, our model exhibits global indeterminacy, since either or can be selected according to agent expectations. Moreover, we prove that conditions guaranteeing the attractivity of also imply the saddle-point stability of . However, when is not attractive, numerical simulations show the possible existence of one or two limit cycles: an attractive one surrounding and one endowed with a two-dimensional stable manifold surrounding .

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 146 (2011)
Issue (Month): 2 (March)
Pages: 569-591

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Handle: RePEc:eee:jetheo:v:146:y:2011:i:2:p:569-591

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Global and local indeterminacy Poverty trap Environmental externalities History versus expectations Open-access natural resources;

References

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Citations

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Cited by:
  1. Angelo Antoci & Marcello Galeotti & Paolo Russu, 2012. "Global Analysis and Indeterminacy in a Two-sector Growth Model with Human Capital," Working Papers Series wp2012_14.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze dell'Economia e Dell'Impresa.
  2. Call, Isabel & Vosti, Stephen A. & Boucher, Stephen R. & Luedeling, Eike, 2012. "Technology Adoption and Climate-Related Policy Evaluation among East African Smallholders: A Bioeconomic Model of the Trade-offs between Trees and Subsistence," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125015, Agricultural and Applied Economics Association.
  3. OA. Carboni & P. Russu, 2012. "Global Indeterminacy in a Tourism Sector Model," Working Paper CRENoS 201230, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  4. Gori, Luca & Sodini, Mauro, 2011. "Nonlinear dynamics in an OLG growth model with young and old age labour supply: the role of public health expenditure," MPRA Paper 28180, University Library of Munich, Germany.

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