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Growth and multiple equilibria: A unique local dynamics

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  • Hosoya, Kei

Abstract

The paper investigates the local dynamics of a simple growth model with a public health factor. A notable feature of the model is that it employs a non-separable utility function between consumption and the level of public health infrastructure (publicly provided health environment). In addition to the effects on utility, an increase in the public health level contributes to labor productivity growth. From a three-dimensional dynamic system that includes physical capital, public health infrastructure and consumption, our model is found to have multiple equilibria (dual steady states) if the deep parameters of the utility function satisfy certain conditions. Then, numerical computations demonstrate that each equilibrium exhibits local saddle-path stability. This result deserves careful attention, as it indicates that the economy experiences a relatively undiversified growth pattern when converging on high- and low-growth equilibria. Our striking result has important implications in the study of growth and development.

Suggested Citation

  • Hosoya, Kei, 2012. "Growth and multiple equilibria: A unique local dynamics," Economic Modelling, Elsevier, vol. 29(5), pages 1662-1665.
  • Handle: RePEc:eee:ecmode:v:29:y:2012:i:5:p:1662-1665
    DOI: 10.1016/j.econmod.2012.05.020
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hosoya, Kei, 2014. "Public health infrastructure and growth: Ways to improve the inferior equilibrium under multiple equilibria," Research in Economics, Elsevier, vol. 68(3), pages 194-207.
    2. Chaudhry, Azam & Tanveer, Hafsa & Naz, R., 2017. "Unique and multiple equilibria in a macroeconomic model with environmental quality: An analysis of local stability," Economic Modelling, Elsevier, vol. 63(C), pages 206-214.
    3. Gaspar, J. & Vasconcelos, P.B. & Afonso, O., 2014. "Economic growth and multiple equilibria: A critical note," Economic Modelling, Elsevier, vol. 36(C), pages 157-160.

    More about this item

    Keywords

    Growth; Multiple equilibria; Local dynamics; Public health infrastructure;

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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