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Factor Intensity reversal and Chaos I


  • Aditya Goenaka
  • Odile Poulsen


We derive necessary and sufficient conditions for the occurrence of ergodic oscillations and geometric sensitivity in a two-sector model of economic growth with labor augmenting externalities. We transform the Euler equation into a first order backward first order equation. Factor intensity reversal is a necessary condition for the dynamics to be chaotic, both in the sense of ergodic oscillations and geometric sensitivity when utility is linear. Under reasonable assumptions on the economic fundamentals, we show that a necessary and sufficient condition for the occurrence of ergodic oscillations and geometric sensitivity is that the representative consumer is sufficiently patient.

Suggested Citation

  • Aditya Goenaka & Odile Poulsen, 2004. "Factor Intensity reversal and Chaos I," Econometric Society 2004 Australasian Meetings 86, Econometric Society.
  • Handle: RePEc:ecm:ausm04:86

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    Labor-augmenting externalities; backward dynamics; factor intensity reversal; ergodic oscillations; geometric sensitivity;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • 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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