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Growth and multiple equilibria: A unique local dynamics

  • Hosoya, Kei
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    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.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0264999312001393
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    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 29 (2012)
    Issue (Month): 5 ()
    Pages: 1662-1665

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    Handle: RePEc:eee:ecmode:v:29:y:2012:i:5:p:1662-1665
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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    9. Agénor, Pierre-Richard, 2008. "Health and infrastructure in a model of endogenous growth," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1407-1422, December.
    10. Alonso-Carrera, Jaime & Freire-Seren, Maria Jesus, 2004. "Multiple equilibria, fiscal policy, and human capital accumulation," Journal of Economic Dynamics and Control, Elsevier, vol. 28(4), pages 841-856, January.
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