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Factor Intensity reversal and Chaos I

Author

Listed:
  • Aditya Goenaka
  • Odile Poulsen

Abstract

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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    File URL: http://repec.org/esAUSM04/up.11259.1076922589.pdf
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    Citations

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    Cited by:

    1. Gomes, Orlando, 2007. "Externalities in R&D: a route to endogenous fluctuations," MPRA Paper 2850, University Library of Munich, Germany.
    2. Gomes, Orlando, 2008. "Too much of a good thing: Endogenous business cycles generated by bounded technological progress," Economic Modelling, Elsevier, vol. 25(5), pages 933-945, September.
    3. Orlando Gomes, 2010. "Consumer confidence, endogenous growth and endogenous cycles," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 37(4), pages 377-404, September.
    4. Orlando Gomes, 2007. "Routes to chaos in macroeconomic theory," Journal of Economic Studies, Emerald Group Publishing, vol. 33(6), pages 437-468, January.
    5. Orlando Gomes, 2006. "Routes to chaos in macroeconomic theory," Journal of Economic Studies, Emerald Group Publishing, vol. 33(6), pages 437-468, November.

    More about this item

    Keywords

    Labor-augmenting externalities; backward dynamics; factor intensity reversal; ergodic oscillations; geometric sensitivity;
    All these keywords.

    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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