Poverty trap and global indeterminacy in a growth model with open-access natural resources

Angelo Antoci, Marcello Galeotti and Paolo Russu ()

Journal of Economic Theory, 2011, vol. 146, issue 2, 569-591

Abstract: In this paper we use global analysis techniques to analyze an economic growth model with environmental negative externalities, giving rise to a three-dimensional dynamic system (the framework is the one introduced by Wirl (1997) [53]). The dynamics of our model admits a locally attracting stationary state , which is, in fact, a poverty trap, coexisting with another stationary state possessing saddle-point stability. Global dynamical analysis shows that, under some conditions on the parameters, if the initial values of the state variables are close enough to the coordinates of , then there exists a continuum of equilibrium trajectories approaching and one trajectory approaching . Therefore, our model exhibits global indeterminacy, since either or can be selected according to agent expectations. Moreover, we prove that conditions guaranteeing the attractivity of also imply the saddle-point stability of . However, when is not attractive, numerical simulations show the possible existence of one or two limit cycles: an attractive one surrounding and one endowed with a two-dimensional stable manifold surrounding .

Keywords: Global; and; local; indeterminacy; Poverty; trap; Environmental; externalities; History; versus; expectations; Open-access; natural; resources (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:146:y:2011:i:2:p:569-591

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