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Indeterminacy and labor augmenting externalities

  • Aditya Goenka


  • Odile Poulsen


We study a two-sector model of economic growth with labor augmenting external effects. Using general specifications of the technologies, we derive necessary and sufficient conditions for local indeterminacy. We show that, when the investment good sector is capital intensive at the private level, the necessary condition for the growth ray to be indeterminate is that the cost of forgoing consumption is not too high. When the consumption good sector is capital intensive, indeterminacy requires that the depreciation of the capital stock is not too low and that utility is not too concave. Copyright Springer-Verlag 2005

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Article provided by Springer in its journal Journal of Economics.

Volume (Year): 10 (2005)
Issue (Month): 1 (December)
Pages: 143-166

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Handle: RePEc:kap:jeczfn:v:10:y:2005:i:1:p:143-166
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  1. Benhabib, J. & Nishimura, K. & Venditti, A., 1999. "Indeterminacy and Cycles in Two-Sector Discrete-Time Models," G.R.E.Q.A.M. 99a58, Universite Aix-Marseille III.
  2. Harrison, Sharon G. & Weder, Mark, 2002. "Tracing externalities as sources of indeterminacy," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 851-867, May.
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  7. Nishimura, Kazuo & Venditti, Alain, 2002. "Intersectoral Externalities and Indeterminacy," Journal of Economic Theory, Elsevier, vol. 105(1), pages 140-157, July.
  8. Drugeon, J.-P. & Vendetti, A., 1998. "Intersectoral External Effects, Multiplicities & Indeterminacies II: The Long-Run Growth Case," G.R.E.Q.A.M. 98a20, Universite Aix-Marseille III.
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  16. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
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