Local indeterminacy in continuous-time models: the role of returns to scale
AbstractThe aim of this paper is to discuss the role of the returns to scale at the private and social levels on the local determinacy properties of the steady state in a continuous-time two-sector economy with sector-specific externalities. First we show that when labor is inelastic, for any configuration of the returns to scale, local indeterminacy is obtained if there is a capital intensity reversal between the private and the social levels. Second, we prove that when labor is infinitely elastic, saddle-point stability is obtained as soon as the investment good sector has constant social returns while local indeterminacy arises if the investment good sector has increasing social returns, provided the consumption good is labor intensive at the social level and the elasticity of intertemporal substitution in consumption admits intermediary values. Finally, we show that local indeterminacy requires a low elasticity of labor when the investment good has constant social returns, but requires either low enough or large enough elasticity of labor when the investment good has increasing social returns.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series Working Papers with number halshs-00281382.
Date of creation: 22 May 2008
Date of revision:
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00281382/en/
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
Sector-specific externalities; constant and increasing returns; intertemporal substitution in consumption; elastic labor; indeterminacy.;
Other versions of this item:
- Garnier, Jean-Philippe & Nishimura, Kazuo & Venditti, Alain, 2013. "Local Indeterminacy In Continuous-Time Models: The Role Of Returns To Scale," Macroeconomic Dynamics, Cambridge University Press, vol. 17(02), pages 326-355, March.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Kazuo Nishimura & Alain Venditti, 2010.
"Indeterminacy and expectation-driven uctuations with non-separable preferences,"
KIER Working Papers
702, Kyoto University, Institute of Economic Research.
- Nishimura, Kazuo & Venditti, Alain, 2010. "Indeterminacy and expectation-driven fluctuations with non-separable preferences," Mathematical Social Sciences, Elsevier, vol. 60(1), pages 46-56, July.
- Frédéric Dufourt & Kazuo Nishimura & Alain Venditti, 2013.
"Indeterminacy and Sunspot Fluctuations in Two-Sector RBC models: Theory and Calibration,"
- Frédéric Dufourt & Kazuo Nishimura & Alain Venditti, 2013. "Indeterminacy and Sunspot Fluctuations in Two-Sector RBC models: Theory and Calibration," AMSE Working Papers 1315, Aix-Marseille School of Economics, Marseille, France, revised Nov 2009.
- Frederic Dufourt & Kazuo Nishimura & Alain Venditti, 2013. "Indeterminacy and sunspot fluctuations in two-sector RBC models: theory and calibration," Working Papers halshs-00796236, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.