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Multiplicity, Overtaking and Convergence in the Lucas Two-Sector Growth Model

  • José Ramón Ruiz-Tamarit

This paper provides the complete closed-form solution to the Lucas two-sector model of endogenous growth. We study the issues of existence, unique-ness, multiplicity, positivity, transitional dynamics and long-run growth, re-lated to the competitive equilibrium paths. We identify the parameter range where the different results hold and deduce the entire trajectories for the original variables. We revise the results on convergence and overtaking which arise from this model, and prove that the parameterization currently used as the background for an explanation of economic miracles and disasters, is not satisfactory because of its counterintuitive implications.

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File URL: http://documentos.fedea.net/pubs/dt/2002/dt-2002-17.pdf
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Paper provided by FEDEA in its series Working Papers with number 2002-17.

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Handle: RePEc:fda:fdaddt:2002-17
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  1. Ortigueira, Salvador & Santos, Manuel S, 1997. "On the Speed of Convergence in Endogenous Growth Models," American Economic Review, American Economic Association, vol. 87(3), pages 383-99, June.
  2. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
  3. J. R. Ruiz-Tamarit & M. Ventura-Marco, . "The Reduction of Dimension in the Study of Economic Growth Models," Working Papers 2001-13, FEDEA.
  4. 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.
  5. James A. Schmitz, Jr., 1993. "Early progress on the "problem of economic development"," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 17-35.
  6. Mulligan, Casey B & Sala-i-Martin, Xavier, 1993. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 739-73, August.
  7. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-67, December.
  8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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