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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
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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

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

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