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Local and global indeterminacy in two-sector models of endogenous growth

  • Brito, Paulo
  • Venditti, Alain

We consider a two-sector endogenous growth model where the productions of the final good and human capital require economy-wide external effects. Assuming constant returns to scale at the private and social levels, we show that local and global indeterminacy of equilibrium paths are compatible with any values for the elasticity of intertemporal substitution in consumption and any sign for the capital intensity difference across the two sectors. We also show that for any value of the elasticity of intertemporal substitution in consumption, poverty traps may occur when the final good sector is capital intensive in human capital.

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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 46 (2010)
Issue (Month): 5 (September)
Pages: 893-911

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Handle: RePEc:eee:mateco:v:46:y:2010:i:5:p:893-911
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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  1. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-67, December.
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