Hostname: page-component-cd9895bd7-mkpzs Total loading time: 0 Render date: 2024-12-28T07:26:47.206Z Has data issue: false hasContentIssue false
  • English
  • Français

INDETERMINACY AND THE ROLE OF FACTOR SUBSTITUTABILITY

Published online by Cambridge University Press:  01 September 2004

KAZUO NISHIMURA  and
ALAIN VENDITTI
KAZUO NISHIMURA
Affiliation:
Institute of Economic Research, Kyoto University
ALAIN VENDITTI
Affiliation:
CNRS-GREQAM
Get access Rights & Permissions [Opens in a new window]

Abstract

We discuss the role of the elasticity of substitution in the local determinacy properties of a steady state or a stationary balanced growth path in a general multisector economy with CES technologies. Our main results are the following: We give some sufficient conditions for the occurrence of local indeterminacy in exogenous and endogenous growth models. We show that local indeterminacy takes place even without a capital intensity reversal from the private to the social level if the productive factors are weakly substitutable. Moreover, we show that the conditions for local indeterminacy in exogenous growth models and in endogenous growth models may be qualitatively different.

Keywords

Sector-Specific ExternalitiesConstant ReturnsFactor SubstitutabilityIndeterminacy
Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 8 , Issue 4 , September 2004 , pp. 436 - 465
Copyright
© 2004 Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Basu S. & J. Fernald 1997 Returns to scale in US production: Estimates and implications. Journal of Political Economy 105, 249– 283.Google Scholar
Becker R. & E. Tsyganov 2002 Ramsey equilibrium in a two-sector model with heterogeneous households. Journal of Economic Theory 105, 188– 225.Google Scholar
Benhabib J. 1998 Introduction to sunspots in macroeconomics. Journal of Economic Theory 81, 1– 6.Google Scholar
Benhabib J. & R. Farmer 1996 Indeterminacy and sector specific externalities. Journal of Monetary Economics 37, 397– 419.Google Scholar
Benhabib J. & R. Farmer 1999 Indeterminacy and sunspots in macroeconomics. In J. Taylor & M. Woodford (eds.), Handbook of Macroeconomics, pp. 387– 448. Amsterdam: North-Holland.
Benhabib J. & R. Farmer 2000 The monetary transmission mechanism. Review of Economic Dynamics 3, 523– 550.Google Scholar
Benhabib J. & K. Nishimura 1979 The Hopf bifurcation and the existence and stability of closed orbits in multisector models of optimal economic growth. Journal of Economic Theory 21, 421– 444.Google Scholar
Benhabib J. & K. Nishimura 1998 Indeterminacy and sunspots with constant returns. Journal of Economic Theory 81, 58– 96.Google Scholar
Benhabib J. & K. Nishimura 1999 Indeterminacy arising in multisector economies. Japanese Economic Review 50, 485– 506.Google Scholar
Benhabib J. & A. Rustichini 1990 Equilibrium cycling with small discounting. Journal of Economic Theory 52, 423– 432.Google Scholar
Benhabib J. & A. Rustichini 1994 Introduction to the symposium on growth, fluctuations and sunspots: Confronting the data. Journal of Economic Theory 63, 1– 19.Google Scholar
Benhabib J., R. Perli & P. Sakellaris 1997 Persistence of Business Cycles in Multisector RBC Models. Mimeo, New York University.
Benhabib J., Q. Meng & K. Nishimura 2000 Indeterminacy under constant returns in multisector economies. Econometrica 68, 1541– 1548.Google Scholar
Benhabib J., K. Nishimura & A. Venditti 2002 Indeterminacy and cycles in two-sector discrete-time model. Economic Theory 20, 217– 235.Google Scholar
Boldrin M. & A. Rustichini 1994 Indeterminacy of equilibria in models with infinitely lived agents and external effects. Econometrica 62, 323– 342.Google Scholar
Bond E., P. Wang & C. Yip 1996 A general two-sector model of endogenous growth with human and physical capital: Balanced growth and transitional dynamics. Journal of Economic Theory 68, 149– 173.Google Scholar
Diamond P. 1965 National debt in a neoclassical growth model. American Economic Review 55, 1126– 1150.Google Scholar
Drugeon J. P., O. Poulsen & A. Venditti 2003 On intersectoral allocations, factors substitutability and multiple long-run growth paths. Economic Theory 21, 175– 183.Google Scholar
Duffy J. & C. Papageorgiou 2000 A cross-country empirical investigation of the aggregate production function specification. Journal of Economic Growth 5, 87– 120.Google Scholar
Evans G. & R. Guesnerie 2003 Editors' introduction to the special issue on coordination in dynamic expectations models: Learning and sunspots. Macroeconomic Dynamics 7, 3– 6.Google Scholar
Galor O. 1992 A two-sector overlapping-generations model: A global characterization of the dynamical system. Econometrica 60, 1351– 1386.Google Scholar
Kehoe T. & D. Levine 1985 Comparative statics and perfect foresight in infinite horizon economies. Econometrica 53, 433– 453.Google Scholar
Kehoe T. D. Levine & P. Romer 1990 Determinacy of equilibria in dynamic models with finitely many consumers. Journal of Economic Theory 50, 1– 21.Google Scholar
Lucas R. 1988 On the mechanics of economic development. Journal of Monetary Economics 22, 3– 42.Google Scholar
McKenzie L. 1960 Matrices with dominant diagonals and economic theory. In K. Arrow, S. Karlin & P. Suppes (eds.), Mathematical Methods in the Social Sciences, pp. 47– 60. Stanford University Press.
Mino K. 2001 Indeterminacy and endogenous growth with social constant returns. Journal of Economic Theory 97, 203– 222.Google Scholar
Mitra T. 1998 On equilibrium dynamics under externalities in a model of economic development. Japanese Economic Review 49, 85– 107.Google Scholar
Muller W. & M. Woodford 1988 Determinacy of equilibria in stationary economies with both finite and infinite lived consumers. Journal of Economic Theory 46, 255– 290.Google Scholar
Nishimura K. & A. Venditti 2002 Intersectoral externalities and indeterminacy. Journal of Economic Theory 105, 140– 157.Google Scholar
Romer P. 1986 Increasing returns and long-run growth. Journal of Political Economy 94, 1002– 1037.Google Scholar
Takayama A. 1997 Mathematical Economics, 2nd Ed. Cambridge, UK: Cambridge University Press.
Wielandt H. 1973 On the eigenvalues of A+B and AB. Journal of Research of the National Bureau of Standards 77B, 61– 63.Google Scholar
Woodford M. 1986 Stationary Sunspot Equilibria: The Case of Small Fluctuations Around a Deterministic Steady State. Mimeo, University of Chicago.
Xie D. 1994 Divergence in economic performance: Transitional dynamics with multiple equilibria. Journal of Economic Theory 63, 97– 112.Google Scholar