Indeterminacy Revisited: Variable Capital Utilization and Returns to Scale

Mark Weder

No 2005-12, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: This paper presents a one-sector optimal growth model with variable capacity services and production externalities. It uses a new formulation of the endogenous capital utilization rate in which utilization costs appear in the form of variable maintenance expenses. I find that indeterminacy arises at approximate constant returns to scale. This result challenges the viewpoint that indeterminacy is empirically implausible.

Keywords: indeterminacy; dynamic general equilibrium; variable capital utilization (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2005-08
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Journal Article: Indeterminacy Revisited: Variable Capital Utilization and Returns to Scale (2005)
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