Factor Intensity reversal and Chaos I

Aditya Goenaka and Odile Poulsen

No 86, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: We derive necessary and sufficient conditions for the occurrence of ergodic oscillations and geometric sensitivity in a two-sector model of economic growth with labor augmenting externalities. We transform the Euler equation into a first order backward first order equation. Factor intensity reversal is a necessary condition for the dynamics to be chaotic, both in the sense of ergodic oscillations and geometric sensitivity when utility is linear. Under reasonable assumptions on the economic fundamentals, we show that a necessary and sufficient condition for the occurrence of ergodic oscillations and geometric sensitivity is that the representative consumer is sufficiently patient.

Keywords: Labor-augmenting externalities; backward dynamics; factor intensity reversal; ergodic oscillations; geometric sensitivity (search for similar items in EconPapers)
JEL-codes: C61 D90 O41 (search for similar items in EconPapers)
Date: 2004-08-11
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Citations: View citations in EconPapers (6)

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