We consider a discrete-time two-sector Cobb-Douglas economy with positive sector specific external effects. We show that indetermincay of steady states and cycles can easily arise with constant or decreasing social returns to scale, and very small market imperfections. This is in sharp contrast with most of the contribution in the literature in which increasing social returns are required to generate indeterminacy.
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Paper provided by Universite Aix-Marseille III in its series G.R.E.Q.A.M. with number
99a58.
Length: 29 pages Date of creation: 1999 Date of revision: Handle: RePEc:fth:aixmeq:99a58
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Find related papers by JEL classification: C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - 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
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