Indeterminacy Revisited: Variable Capital Utilization and Returns to Scale
This paper presents a one-sector optimal growth model with variable capacity services and production externalities. It uses a new formulation of the endogenous capital utilization rate in which utilization costs appear in the form of variable maintenance expenses. I find that indeterminacy arises at approximate constant returns to scale. This result challenges the viewpoint that indeterminacy is empirically implausible.
Volume (Year): 18 (2005)
Issue (Month): 2 (Autumn)
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