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Indeterminacy and labor augmenting externalities

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  • Aditya Goenka
  • Odile Poulsen

Abstract

We study a two-sector model of economic growth with labor augmenting external effects. Using general specifications of the technologies, we derive necessary and sufficient conditions for local indeterminacy. We show that, when the investment good sector is capital intensive at the private level, the necessary condition for the growth ray to be indeterminate is that the cost of forgoing consumption is not too high. When the consumption good sector is capital intensive, indeterminacy requires that the depreciation of the capital stock is not too low and that utility is not too concave. Copyright Springer-Verlag 2005
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  • Aditya Goenka & Odile Poulsen, 2005. "Indeterminacy and labor augmenting externalities," Journal of Economics, Springer, vol. 10(1), pages 143-166, December.
    • Handle: RePEc:kap:jeczfn:v:10:y:2005:i:1:p:143-166
    DOI: 10.1007/BF03051803
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    Cited by:

    1. Poulsen, Odile & Svendsen, Gert Tinggaard, 2005. "Love Thy Neighbor: Bonding versus Bridging Trust," Working Papers 05-7, University of Aarhus, Aarhus School of Business, Department of Economics.
    2. Poulsen, Odile & Svendsen, Gert Tinggaard, 2005. "The Long and Winding Road: Social Capital and Commuting," Working Papers 05-6, University of Aarhus, Aarhus School of Business, Department of Economics.
    3. Goenka, Aditya & Poulsen, Odile, 2004. "Factor Intensity Reversal and Ergodic Chaos," Working Papers 04-13, University of Aarhus, Aarhus School of Business, Department of Economics.
    4. Shiro Kuwahara, 2017. "Multiple steady states and indeterminacy in the Uzawa–Lucas model with educational externalities," Journal of Economics, Springer, vol. 122(2), pages 173-190, October.
    5. Chu, Angus C. & Liao, Chih-Hsing & Liu, Xiangbo & Zhang, Mengbo, 2021. "Indeterminacy in a matching model of money with productive government expenditure," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 497-516.
    6. Poulsen, Odile & Svendsen, Gert Tinggaard, 2004. "Social Capital and Market Centralisation: A Two-Sector Model," Working Papers 04-12, University of Aarhus, Aarhus School of Business, Department of Economics.
    7. Naito, Takumi, 2006. "Growth, revenue, and welfare effects of tariff and tax reform: Win-win-win strategies," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1263-1280, August.
    8. Takumi Naito & Ryoji Ohdoi, 2008. "Dynamics of a two-sector endogenous growth model with intersectoral knowledge spillovers," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(3), pages 599-605, June.

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    More about this item

    Keywords

    Indeterminacy; externalities; two-sector growth model; factor intensities; C62; E32; O41;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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