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Two-Sector Growth Models with Productive Public Goods: Equilibrium (In)determinacy

Author

Listed:
  • Been-Lon Chen

    () (Institute of Economics, Academia Sinica, 128 Academia Road, Section 2, Taipei 11529, Taiwan)

  • Shun-Fa Lee

    () (Department of Industrial Economics, Tamkang University, 151 Ying-chuan Road, Tamsui, Taipei County 25137, Taiwan)

Abstract

In existing two-sector, human capital–based endogenous growth models with social constant returns, local equilibrium indeterminacy emerges based upon either differential factor tax rates or sector-specific externalities. Two primary results are established in this paper. First, once there are productive public goods, the two existing mechanisms are not robust in establishing local indeterminacy. Second, with the congestion effect in the use of public services, local indeterminacy is regained.

Suggested Citation

  • Been-Lon Chen & Shun-Fa Lee, 2009. "Two-Sector Growth Models with Productive Public Goods: Equilibrium (In)determinacy," Southern Economic Journal, Southern Economic Association, vol. 75(3), pages 639-662, January.
  • Handle: RePEc:sej:ancoec:v:75:3:y:2009:p:639-662
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    More about this item

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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