Elsevier

Journal of Economic Theory

Volume 136, Issue 1, September 2007, Pages 392-416
Journal of Economic Theory

Stability, global dynamics and Markov equilibrium in models of endogenous economic growth

https://doi.org/10.1016/j.jet.2006.09.009Get rights and content

Abstract

This paper studies the local and global dynamics of two-sector models of endogenous growth with economy-wide external effects and taxes on capital and labor. The local analysis classifies the parameter space depending on the number of stationary solutions and local stability of equilibria. The global analysis shows that if taxes are within certain bounds and the size of the external effects on the average level of human capital is smaller than the share of physical capital, the equilibrium path is monotone and therefore a continuous Markov equilibrium can be constructed.

References (35)

  • S. Ortigueira et al.

    Equilibrium dynamics in a two-sector model with taxes

    J. Econ. Theory

    (2002)
  • X. Raurich

    Indeterminacy and government spending in a two-sector model of endogenous growth

    Rev. Econ. Dynam.

    (2001)
  • M.S. Santos

    On non-existence of Markov equilibria in competitive-market economies

    J. Econ. Theory

    (2002)
  • A. Venditti

    Indeterminacy and endogenous fluctuations in two-sector growth models with externalities

    J. Econ. Behav. Organ.

    (1998)
  • D. Xie

    Divergence in economic performance: transitional dynamics with multiple equilibria

    J. Econ. Theory

    (1994)
  • J. Alonso-Carrera

    More on dynamics in the endogenous growth model with human capital

    Investigaciones Econ.

    (2001)
  • J. Benhabib et al.

    On growth and indeterminacy: some theory and evidence

  • Cited by (11)

    • Growth and multiple equilibria: A unique local dynamics

      2012, Economic Modelling
      Citation Excerpt :

      There are few studies that have looked at the equilibrium properties under multiple steady states. Exceptional and valuable studies in this area include Greiner (2003), Mino (2004), Park and Philippopoulos (2004), García-Belenguer (2007) and Pérez and Ruiz (2007). Within various specifications, these papers demonstrated the existence of globally indeterminate multiple BGP equilibria, and then further analyzed the situation where there was at least one locally indeterminate equilibrium.

    • Local and global indeterminacy in two-sector models of endogenous growth

      2010, Journal of Mathematical Economics
      Citation Excerpt :

      In a second and more recent set of contributions, García-Belenguer (2007) and Mattana et al. (2009) focus on different specifications for the external effects. García-Belenguer (2007) shows the existence of multiple stationary balanced growth paths with a Lucas model augmented to include aggregate physical capital externalities in the production of the final good and decreasing returns to scale in the human capital accumulation process. Local indeterminacy and poverty traps through the existence of global indeterminacy are also obtained but require the elasticity of intertemporal substitution in consumption to be larger than one.3

    View all citing articles on Scopus
    View full text