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Indeterminacy Under Constant Returns to Scale in Multisector Economies

Author

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  • Benhabib, J.
  • Meng, Q.
  • Nishimura, K.

Abstract

The purpose of this paper is to characterize the possibility of indeterminacy in multisector growth models that exhibit constant marginal returns to scale at the social level, with empirically realistic small external effects. Our results demonstrate that indeterminacy does not require increasing returns to scale, large external effects, or close to linear utility functions. A small divergence between the social and private returns is sufficient for multiple equilibria.

Suggested Citation

  • Benhabib, J. & Meng, Q. & Nishimura, K., 1999. "Indeterminacy Under Constant Returns to Scale in Multisector Economies," Working Papers 99-17, C.V. Starr Center for Applied Economics, New York University.
  • Handle: RePEc:cvs:starer:99-17
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    File URL: http://econ.as.nyu.edu/docs/IO/9186/RR99-17.PDF
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    References listed on IDEAS

    as
    1. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, vol. 63(1), pages 19-41, June.
    2. Benhabib, Jess & Farmer, Roger E. A., 1996. "Indeterminacy and sector-specific externalities," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 421-443, June.
    3. Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996. "A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics," Journal of Economic Theory, Elsevier, vol. 68(1), pages 149-173, January.
    4. Xie Danyang, 1994. "Divergence in Economic Performance: Transitional Dynamics with Multiple Equilibria," Journal of Economic Theory, Elsevier, vol. 63(1), pages 97-112, June.
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    Keywords

    INDETERMINACY; ENDOGENOUS GROWTH.;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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