Complementarities and Costly Investment in a One-Sector Growth Model
The presence of complementarities generally makes a growth model nonlinear, hence delivering multiple equilibria. Introducing internal investment costs in the R&D-based growth literature, we develop a growth model which combines the assumptions of complementarities between capital goods in the production function and of internal costly investment in capital. We find that with such combination of complementarities and costly investment, the growth model delivers a single equilibrium.
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