Steady States with Giffen Goods in the Dynamic Two-Sector Model

Kazumichi Iwasa and Kazuo Nishimura
Additional contact information
Kazumichi Iwasa: Research Institute for Economics and Business Administration, Kobe University, JAPAN
Kazuo Nishimura: Research Institute for Economics and Business Administration and Center for Computational Social Science, Kobe University, JAPAN

No DP2026-07, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper examines the relationship between dynamic stability and the presence of Giffen goods in a standard two-sector growth model. We show that a steady state may take the form of a saddle point even when a labor-intensive good becomes a Giffen good at the steady state.The results highlight that the stability of equilibria is shaped not by the presence of Giffen behavior per se, but by the strength of the income effect associated with inferior goods. When this effect is suffciently large, steady states can become unstable; otherwise, stability is preserved. These findings clarify the conditions under which Giffen behavior interacts with dynamic equilibria, and emphasize the central role of income elasticity in determining stability outcomes.

Keywords: Giffen goods; Dynamic stability; Two-sector model; Income elasticity (search for similar items in EconPapers)
JEL-codes: D11 E13 E21 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2026-03
New Economics Papers: this item is included in nep-gro and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2026-07.pdf First version, 2026 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kob:dpaper:dp2026-07

Access Statistics for this paper

More papers in Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University 2-1 Rokkodai, Nada, Kobe 657-8501 JAPAN. Contact information at EDIRC.
Bibliographic data for series maintained by Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University ().