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Endogenous Equilibrium Growth With Recursive Preferences And Increasing Returns

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  • Hyun Park

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    (Department of Economics, Kyung Hee University)

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    Abstract

    This paper studies the short-run and long-run behavior of a competitive economy in which both the discount factor and technological change are endogenously determined. In particular, the effect of saving behavior on persistent economic growth is considered. The paper provides the sufficient condition on the rate of impatience and the concavity of private technology for uniqueness and local stability of the steady state in the competitive economy. The condition implies determinacy of transitional equilibrium paths. However, the paper also shows that the presence of externalities and adjustment cost of investment can lead to indeterminacy of steady state equilibra.

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    Bibliographic Info

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 33 (2008)
    Issue (Month): 2 (December)
    Pages: 167-188

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    Handle: RePEc:jed:journl:v:33:y:2008:i:2:p:167-188

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    Related research

    Keywords: Recursive Preference; Increasing Returns; Indeterminacy; Local Stability;

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    1. LE VAN, Cuong & VAILAKIS, Yiannis, 2002. "Recursive utility and optimal growth with bounded or unbounded returns," CORE Discussion Papers 2002055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Jess Benhabib & Roger E.A. Farmer, 1992. "Indeterminacy and Increasing Returns," UCLA Economics Working Papers 646, UCLA Department of Economics.
    3. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
    4. Becker, Robert A. & Boyd, John III & Sung, Bom Yong, 1989. "Recursive utility and optimal capital accumulation. I. Existence," Journal of Economic Theory, Elsevier, vol. 47(1), pages 76-100, February.
    5. Epstein, Larry G., 1987. "A simple dynamic general equilibrium model," Journal of Economic Theory, Elsevier, vol. 41(1), pages 68-95, February.
    6. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
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    Cited by:
    1. Stefan D. Josten, 2013. "Middle-Class Consensus, Social Capital And The Fundamental Causes Of Economic Growth And Development," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(1), pages 1-26, March.

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