Technology choice, externalities in production, and a chaotic middle-income trap

Takao Asano (), Akihisa Shibata and Masanori Yokoo ()
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Takao Asano: Okayama University
Masanori Yokoo: Okayama University

Journal of Economics, 2024, vol. 141, issue 1, No 2, 29-56

Abstract: Abstract We incorporate the external effects of capital in production and endogenous technology choice into the standard overlapping generations model. We demonstrate that our model can exhibit a poverty trap, a middle-income trap, and perpetual growth paths. We also show that, under some economic conditions, an economy exhibits all three of these phenomena, depending on its initial capital level, and that the economy caught in the middle-income trap can exhibit chaotic fluctuations in the long run. This is a stark contrast to the result obtained by Umezuki and Yokoo (J Econ Dyn Control 100:164-175, 2019a) that we cannot observe any chaotic fluctuations. Because the model of Umezuki and Yokoo (2019) is a special case of our model in the sense that there is no externality in production, our result means that we need the combination of technology choice and externalities in production to obtain chaotic fluctuations in the standard overlapping generations model with Cobb-Douglas technologies.

Keywords: External effect; Technology choice; Overlapping generations model; Middle-income trap; Chaos (search for similar items in EconPapers)
JEL-codes: E32 O14 O41 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: Technology Choice, Externalities in Production, and a Chaotic Middle-Income Trap (2023)
Working Paper: Technology Choice, Externalities in Production, and Chaotic Middle-Income Traps (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:141:y:2024:i:1:d:10.1007_s00712-023-00844-9

DOI: 10.1007/s00712-023-00844-9

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