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Indeterminacy and labor augmenting externalities

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  • Aditya Goenka

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  • Odile Poulsen

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Abstract

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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Suggested Citation

  • Aditya Goenka & Odile Poulsen, 2005. "Indeterminacy and labor augmenting externalities," Journal of Economics, Springer, vol. 10(1), pages 143-166, December.
  • Handle: RePEc:kap:jeczfn:v:10:y:2005:i:1:p:143-166 DOI: 10.1007/BF03051803
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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.
    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.
    3. Benhabib Jess & Perli Roberto, 1994. "Uniqueness and Indeterminacy: On the Dynamics of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 63(1), pages 113-142, June.
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    5. Boldrin, Michele & Rustichini, Aldo, 1994. "Growth and Indeterminacy in Dynamic Models with Externalities," Econometrica, Econometric Society, vol. 62(2), pages 323-342, March.
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    9. 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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    Citations

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    Cited by:

    1. Takumi Naito & Ryoji Ohdoi, 2008. "Dynamics of a two-sector endogenous growth model with intersectoral knowledge spillovers," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 599-605.
    2. Poulsen, Odile & Svendsen, Gert Tinggaard, 2005. "The Long and Winding Road: Social Capital and Commuting," Working Papers 05-6, University of Aarhus, Aarhus School of Business, Department of Economics.
    3. Goenka, Aditya & Poulsen, Odile, 2004. "Factor Intensity Reversal and Ergodic Chaos," Working Papers 04-13, University of Aarhus, Aarhus School of Business, Department of Economics.
    4. Poulsen, Odile & Svendsen, Gert Tinggaard, 2004. "Social Capital and Market Centralisation: A Two-Sector Model," Working Papers 04-12, University of Aarhus, Aarhus School of Business, Department of Economics.
    5. repec:kap:jeczfn:v:122:y:2017:i:2:d:10.1007_s00712-017-0535-7 is not listed on IDEAS
    6. Naito, Takumi, 2006. "Growth, revenue, and welfare effects of tariff and tax reform: Win-win-win strategies," Journal of Public Economics, Elsevier, pages 1263-1280.
    7. Poulsen, Odile & Svendsen, Gert Tinggaard, 2005. "Love Thy Neighbor: Bonding versus Bridging Trust," Working Papers 05-7, University of Aarhus, Aarhus School of Business, Department of Economics.

    More about this item

    Keywords

    Indeterminacy; externalities; two-sector growth model; factor intensities; C62; E32; O41;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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