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Equilibrium Dynamics in Discrete-Time Endogenous Growth Models with Social Constant Returns

  • Kazuo Mino

    ()

    (Faculty of Economics, Osaka University)

  • Kazuo Nishimura

    (Kyoto University)

  • Koji Shimomura

    (Kobe University)

  • Ping Wang

    (Washington University in St. Louis and NBER)

The existing literature establishes possibilities of local determinacy and dynamic indeterminacy in continuous-time two-sector models of endogenous growth with social constant returns. The necessary and sufficient condition for local determinacy is that the factor intensity rankings of the two sectors are consistent in the private/physical and social/value sense. The necessary and sufficient condition for dynamic indeterminacy is that the final (consumable) good sector is human (pure) capital intensive in the private sense but physical (consumable) capital intensive in the social sense. This paper re-examines the dynamic properties in a discrete-time endogenous growth framework and finds that conventional propositions obtained in continuous time need not be valid. It is shown that the established necessary and sufficient conditions on factor intensity rankings for local determinacy and dynamic indeterminacy are neither sufficient nor necessary, as the magnitudes of time preference and capital depreciation rates both play essential roles.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0534.pdf
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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 05-34.

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Length: 30 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:osk:wpaper:0534
Contact details of provider: Web page: http://www.econ.osaka-u.ac.jp/Email:


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  1. 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.
  2. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, vol. 63(1), pages 19-41, June.
  3. Benhabib, Jess & Farmer, Roger E. A., 1996. "Indeterminacy and sector-specific externalities," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 421-443, June.
  4. Baierla, Gary & Nishimura, Kazuo & Yano, Makoto, 1998. "The role of capital depreciation in multi-sectoral models," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 467-479, January.
  5. Benhabib, Jess & Nishimura, Kazuo, 1998. "Indeterminacy and Sunspots with Constant Returns," Journal of Economic Theory, Elsevier, vol. 81(1), pages 58-96, July.
  6. Danyang Xie, 2002. "Divergence in Economic Performance: Transitional Dynamics with Multiple Equilibria," GE, Growth, Math methods 0210002, EconWPA.
  7. Nishimura, Kazuo & Shimomura, Koji, 2002. "Trade and Indeterminacy in a Dynamic General Equilibrium Model," Journal of Economic Theory, Elsevier, vol. 105(1), pages 244-260, July.
  8. Laing, Derek & Palivos, Theodore & Wang, Ping, 1995. "Learning, Matching and Growth," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 115-29, January.
  9. Schmitt-Grohe, Stephanie, 1997. "Comparing Four Models of Aggregate Fluctuations due to Self-Fulfilling Expectations," Journal of Economic Theory, Elsevier, vol. 72(1), pages 96-147, January.
  10. 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.
  11. Benhabib Jess & Rustichini Aldo, 1994. "Introduction to the Symposium on Growth, Fluctuations, and Sunspots: Confronting the Data," Journal of Economic Theory, Elsevier, vol. 63(1), pages 1-18, June.
  12. Mino, Kazuo, 2001. "Indeterminacy and Endogenous Growth with Social Constant Returns," Journal of Economic Theory, Elsevier, vol. 97(1), pages 203-222, March.
  13. 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.
  14. Nishimura, Kazuo & Venditti, Alain, 2002. "Intersectoral Externalities and Indeterminacy," Journal of Economic Theory, Elsevier, vol. 105(1), pages 140-157, July.
  15. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  16. Benhabib, J. & Nishimura, K. & Venditti, A., 1999. "Indeterminacy and Cycles in Two-Sector Discrete-Time Models," G.R.E.Q.A.M. 99a58, Universite Aix-Marseille III.
  17. Roger E.A. Farmer & Jang Ting Guo, 1992. "Real Business Cycles and the Animal Spirits Hypothesis," UCLA Economics Working Papers 680, UCLA Department of Economics.
  18. repec:van:wpaper:0031 is not listed on IDEAS
  19. Jess Benhabib & Kazuo Nishimura, 1999. "Indeterminacy Arising in Multi-sector Economies," The Japanese Economic Review, Japanese Economic Association, vol. 50(4), pages 485-506, December.
  20. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  21. Mino, Kazuo, 1996. "Analysis of a Two-Sector Model of Endogenous Growth with Capital Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 227-51, February.
  22. Eric W. Bond & Kathleen Trask & Ping Wang, 2003. "Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1041-1060, 08.
  23. Mitra, Tapan, 1998. "On the relationship between discounting and complicated behavior in dynamic optimization models," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 421-434, January.
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