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Endogenous Equilibrium Growth With Recursive Preferences And Increasing Returns

Author

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  • Hyun Park

    (Department of Economics, Kyung Hee University)

Abstract

This paper studies the short-run and long-run behavior of a competitive economy in which both the discount factor and technological change are endogenously determined. In particular, the effect of saving behavior on persistent economic growth is considered. The paper provides the sufficient condition on the rate of impatience and the concavity of private technology for uniqueness and local stability of the steady state in the competitive economy. The condition implies determinacy of transitional equilibrium paths. However, the paper also shows that the presence of externalities and adjustment cost of investment can lead to indeterminacy of steady state equilibra.

Suggested Citation

  • Hyun Park, 2008. "Endogenous Equilibrium Growth With Recursive Preferences And Increasing Returns," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 33(2), pages 167-188, December.
    • Handle: RePEc:jed:journl:v:33:y:2008:i:2:p:167-188
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
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    3. Le Van, Cuong & Vailakis, Yiannis, 2005. "Recursive utility and optimal growth with bounded or unbounded returns," Journal of Economic Theory, Elsevier, vol. 123(2), pages 187-209, August.
    4. Becker, Robert A & Boyd, John H, III, 1992. "Recursive Utility and Optimal Capital Accumulation II: Sensitivity and Duality Theory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(4), pages 547-563, October.
    5. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    6. Farmer, Roger E.A. & Lahiri, Amartya, 2005. "Recursive preferences and balanced growth," Journal of Economic Theory, Elsevier, vol. 125(1), pages 61-77, November.
    7. Suzuki, Takashi, 1996. "Intertemporal General Equilibrium Model with External Increasing Returns," Journal of Economic Theory, Elsevier, vol. 69(1), pages 117-133, April.
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    10. Palivos, Theodore & Wang, Ping & Zhang, Jianbo, 1997. "On the Existence of Balanced Growth Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 205-224, February.
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    12. Hyun Park, 2000. "Global asymptotic stability of a competitive equilibrium with recursive preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(3), pages 565-584.
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    Cited by:

    1. Stefan D. Josten, 2013. "Middle-Class Consensus, Social Capital And The Fundamental Causes Of Economic Growth And Development," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(1), pages 1-26, March.

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    More about this item

    Keywords

    Recursive Preference; Increasing Returns; Indeterminacy; Local Stability;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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