On the Impact of Heterogeneity on Indeterminacy
AbstractSome recent research indicates that the occurrence of indeterminacy in mod- els with externalities may be overstated because these models ignore agents’ heterogene- ity. We consider a neoclassical two-sector growth model with technological externalities. Agents are heterogenous in respect to their shares of the initial stock of capital and in labor endowments. We find that the sign of the effect of inequality on indeterminacy is not pinned down by the standard properties of preferences. However, when the in- verse of absolute risk aversion is a convex (respectively concave) function homogeneity (heterogeneity) tends to neutralize the external effects and eliminate indeterminacy.
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Bibliographic InfoPaper provided by Département des Sciences Économiques, Université de Genève in its series Research Papers by the Department of Economics, University of Geneva with number 2004.09.
Length: 29 pages
Date of creation: Aug 2004
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endogenous growth; heterogeneity; indeterminacy; inequalities; income distribution.;
Other versions of this item:
- D30 - Microeconomics - - Distribution - - - General
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- D90 - Microeconomics - - Intertemporal Choice - - - General
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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