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Indeterminacy Under Constant Returns to Scale in Multisector Economies

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Author Info
Benhabib, J.
Meng, Q.
Nishimura, K.

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Abstract

The purpose of this paper is to characterize the possibility of indeterminacy in multisector growth models that exhibit constant marginal returns to scale at the social level, with empirically realistic small external effects. Our results demonstrate that indeterminacy does not require increasing returns to scale, large external effects, or close to linear utility functions. A small divergence between the social and private returns is sufficient for multiple equilibria.

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Publisher Info
Paper provided by C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 99-17.

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Length: 14 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:cvs:starer:99-17

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Keywords: INDETERMINACY; ENDOGENOUS GROWTH.;

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Find related papers by JEL classification:
E00 - Macroeconomics and Monetary Economics - - General - - - General
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

References listed on IDEAS
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  1. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, vol. 63(1), pages 19-41, June. [Downloadable!] (restricted)
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  2. Benhabib, Jess & Nishimura, Kazuo, 1998. "Indeterminacy and Sunspots with Constant Returns," Journal of Economic Theory, Elsevier, vol. 81(1), pages 58-96, July. [Downloadable!] (restricted)
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  3. Benhabib, Jess & Farmer, Roger E.A., 1995. "Indeterminacy and Sector-Specific Externalities," Working Papers 95-02, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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  4. Mulligan, Casey B & Sala-i-Martin, Xavier, 1993. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 739-73, August. [Downloadable!] (restricted)
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  5. Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-83, April.
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  6. Eric W. Bond & Ping Wang & Chong K. Yip, 1993. "A general two sector model of endogenous growth with human and physical capital," Research Paper 9303, Federal Reserve Bank of Dallas. [Downloadable!]
  7. Schmitt-Grohe, Stephanie, 1997. "Comparing Four Models of Aggregate Fluctuations due to Self-Fulfilling Expectations," Journal of Economic Theory, Elsevier, vol. 72(1), pages 96-147, January. [Downloadable!] (restricted)
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  8. Benhabib, J. & Perli, R., 1993. "Uniqueness and Indeterminacy: Transitional Dynamics in a Model of Endogenous Growth," Working Papers 93-13, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  9. Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996. "A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics," Journal of Economic Theory, Elsevier, vol. 68(1), pages 149-173, January. [Downloadable!] (restricted)
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  10. Xie Danyang, 1994. "Divergence in Economic Performance: Transitional Dynamics with Multiple Equilibria," Journal of Economic Theory, Elsevier, vol. 63(1), pages 97-112, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Luis Aguiar-Conraria & Yi Wen, 2005. "Foreign trade and equilibrium indeterminacy," Working Papers 2005-041, Federal Reserve Bank of St. Louis. [Downloadable!]
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  2. Jeong-Joon Lee, 2007. "The Adjusted Solow Residual and Asset Returns," Eastern Economic Journal, Eastern Economic Association, vol. 33(2), pages 231-255, Spring. [Downloadable!]
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  3. Aditya Goenka & Odile Poulsen, 2005. "Indeterminacy and labor augmenting externalities," Journal of Economics, Springer, vol. 10(1), pages 143-166, December. [Downloadable!] (restricted)
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  4. Marcus Berliant & Ping Wang, 2004. "Dynamic Urban Models: Agglomeration and Growth," Urban/Regional 0404006, EconWPA. [Downloadable!]
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  5. Kazuo Mino & Kazuo Nishimura & Koji Shimomura & Ping Wang, 2008. "Equilibrium dynamics in discrete-time endogenous growth models with social constant returns," Economic Theory, Springer, vol. 34(1), pages 1-23, January. [Downloadable!] (restricted)
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  6. García-Belenguer, Fernando, 2006. "Stability, Global Dynamics and Markov Equilibrium in Models of Economic Growth," Working Papers in Economic Theory 2006/05, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History). [Downloadable!]
  7. Jang-Ting Guo & Sharon G. Harrison, 2008. "Indeterminacy with No-Income-Effect Preferences and Sector-Specific Externalities," Working Papers 200809, University of California at Riverside, Department of Economics, revised Jul 2008. [Downloadable!]
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  8. Luís Aguiar-Conraria & Yi Wen, 2007. "A note on oil dependence and economic instability," Working Papers 2006-060, Federal Reserve Bank of St. Louis. [Downloadable!]
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  9. Jang-Ting Guo & Kevin J. Lansing, 2005. "Maintenance expenditures and indeterminacy under increasing returns to scale," Working Paper Series 2005-10, Federal Reserve Bank of San Francisco. [Downloadable!]
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  10. Nicholas C.S. Sim & Kong-Weng Ho, 2007. "Autarkic Indeterminacy and Trade Determinacy," Economic Growth centre Working Paper Series 0706, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre. [Downloadable!]
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  11. Junko Doi & Kazuo Nishimura & Koji Shimomura, 2006. "A two-country dynamic model of international trade and endogenous growth: multiple balanced growth paths and stability," Discussion Paper Series 188, Research Institute for Economics & Business Administration, Kobe University. [Downloadable!]
  12. Tarek Coury & Yi Wen, 2007. "Global indeterminacy in locally determinate RBC models," Working Papers 2007-029, Federal Reserve Bank of St. Louis. [Downloadable!]
  13. Yunfang Hu & Kazuo Mino, 2009. "Financial Integration and Aggregate Stability," Discussion Papers in Economics and Business 09-01, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]
  14. Neville N. Jiang & Ping Wang & Haibin Wu, 2002. "Finance Thy Growth: The Role of Occupational Choice By Ability-Heterogeneous Agents," Working Papers 0228, Department of Economics, Vanderbilt University, revised Oct 2003. [Downloadable!]
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