Indeterminacy in a model with production externality and inferiority in consumption

Kazumichi Iwasa and Kazuo Nishimura

International Journal of Economic Theory, 2022, vol. 18, issue 4, 607-623

Abstract: We study the dynamic property of a constant returns two‐sector model with sector‐specific externality. In this study, we consider two types of consumption good, one of which is a pure consumption good and the other is a consumable capital good. Then, we examine the case where households tend to consume more pure consumption goods and consume less consumable capital ones. We show that if a consumable capital good is inferior it is possible that indeterminacy occurs around a steady state without capital intensity reversal between the private and the social levels.

Date: 2022
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https://doi.org/10.1111/ijet.12324

Related works:
Working Paper: Indeterminacy in a Model with Production Externality and Inferiority in Consumption (2015)
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