Sector-Specific Externalities and Endogenous Growth under Social Constant Returns
AbstractBy examining two-sector models of endogenous growth with physical and human capital, this paper demonstrates that indeterminacy of equilibrium may emerge even in the absence of social increasing returns. The first model we examine assumes that both final good and new human capital production sectors employ physical as well as human capital under social constant returns but private decreasing returns due to the presence of sector-specific externalities. It is shown that a small divergence between private and social factor intensity conditions generates indeterminacy of equilibrium rather easily even under constant returns. I addition, we show that introducing endogenous labor supply may enhance the possibility of indeterminacy. Some extensions and intuitive interpretation of the indeterminacy conditions are also presented.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 16993.
Date of creation: Feb 2000
Date of revision:
social constant returns; indeterminacy of equilibrium; endogenous growth;
Find related papers by JEL classification:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
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