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Multiplicity, Overtaking and Convergence in the Lucas Two-Sector Growth Model

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José Ramón Ruiz-Tamarit

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Abstract

This paper provides the complete closed-form solution to the Lucas two-sector model of endogenous growth. We study the issues of existence, unique-ness, multiplicity, positivity, transitional dynamics and long-run growth, re-lated to the competitive equilibrium paths. We identify the parameter range where the different results hold and deduce the entire trajectories for the original variables. We revise the results on convergence and overtaking which arise from this model, and prove that the parameterization currently used as the background for an explanation of economic miracles and disasters, is not satisfactory because of its counterintuitive implications.

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Paper provided by FEDEA in its series Working Papers with number 2002-17.

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Handle: RePEc:fda:fdaddt:2002-17

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  1. Stephen L. Parente & Edward C. Prescott, 1991. "Technology Adoption and Growth," NBER Working Papers 3733, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. William Easterly & Ross Levine, 2002. "It's Not Factor Accumulation: Stylized Facts and Growth Models," Working Papers Central Bank of Chile 164, Central Bank of Chile. [Downloadable!]
  3. Stephen L. Parente & Edward C. Prescott, 1993. "Changes in the wealth of nations," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-16. [Downloadable!]
  4. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April. [Downloadable!] (restricted)
  5. Boyan Jovanovic, 1995. "Learning and Growth," NBER Working Papers 5383, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Ortigueira, Salvador & Santos, Manuel S, 1997. "On the Speed of Convergence in Endogenous Growth Models," American Economic Review, American Economic Association, vol. 87(3), pages 383-99, June. [Downloadable!] (restricted)
  7. Jordan Rappaport, 2000. "Is the speed of convergence constant?," Research Working Paper RWP 00-10, Federal Reserve Bank of Kansas City. [Downloadable!]
  8. 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. [Downloadable!] (restricted)
  9. Casey B. Mulligan & Xavier Sala-i-Martin, 1992. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," NBER Working Papers 3986, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. J. R. Ruiz-Tamarit & M. Ventura-Marco, . "The Reduction of Dimension in the Study of Economic Growth Models," Working Papers 2001-13, FEDEA. [Downloadable!]
  11. Robert E. Lucas, Jr., 1989. "On the Mechanics of Economic Development," NBER Reprints 1176, National Bureau of Economic Research, Inc.
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  12. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-67, December. [Downloadable!] (restricted)
  13. 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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  1. J. AZNAR-MARQUEZ & J.R. Ruiz-Tamarit, 2002. "Closed-Form Solution for a Two-Sector Endogenous Growth Model with two Controls," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2002030, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  2. J. AZNAR-MARQUEZ & J.R. Ruiz-Tamarit, 2002. "Renewable Natural Resources and Endogenous Growth," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2002029, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
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