Global Analysis and Indeterminacy in a Two-sector Growth Model with Human Capital
AbstractThe purpose of the present paper is to highlight some features of global dynamics of the two-sector growth model with accumulation of human and physical capital analyzed by Brito and Venditti, which is a specification of the model proposed by Mulligan and Sala-i-Martin. In particular, our analysis focuses on the context in which Brito-Venditti system admits two balanced growth paths each of them corresponding, after a change of variables, to an equilibrium point of a 3-dimensional system, and proves the possible existence of points P such that in any neighborhood of P lying on the plane corresponding to a fixed value of the state variable there exist points Q whose positive trajectories tend to either equilibrium point. This implies that equilibrium selection in Brito Venditti system may depend on expectations of economic agents rather than on the history of the economy. That is, economies with identical technologies and preferences, starting from the same initial values of the state variables (history), may follow rather different equilibrium trajectories according to the economic agents' choices of the initial values of the jumping variables (expectations). Moreover we prove that the basins of attraction (two or three dimensional) of locally indeterminate equilibrium points may be very large, as they may extend up to the boundary of the system phase space.
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Bibliographic InfoPaper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze dell'Economia e Dell'Impresa in its series Working Papers Series with number wp2012_14.rdf.
Length: 31 pages
Date of creation: 2012
Date of revision:
global and local indeterminacy; two-sector model; endogenous growth; poverty trap; global analysis;
Other versions of this item:
- Antoci, Angelo & Galeotti, Marcello & Russu, Paolo, 2012. "Global analysis and indeterminacy in a two-sector growth model with human capital," MPRA Paper 39079, University Library of Munich, Germany.
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-01 (All new papers)
- NEP-DGE-2012-07-01 (Dynamic General Equilibrium)
- NEP-FDG-2012-07-01 (Financial Development & Growth)
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