Global Analysis and Indeterminacy in a Two-sector Growth Model with Human Capital
Marcello Galeotti () and
Paolo Russu ()
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Marcello Galeotti: Università degli Studi di Firenze,
Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa
The purpose of the present paper is to highlight some features of global dynamics of the two-sector growth model with accumulation of human and physical capital analyzed by Brito and Venditti, which is a specification of the model proposed by Mulligan and Sala-i-Martin. In particular, our analysis focuses on the context in which Brito-Venditti system admits two balanced growth paths each of them corresponding, after a change of variables, to an equilibrium point of a 3-dimensional system, and proves the possible existence of points P such that in any neighborhood of P lying on the plane corresponding to a fixed value of the state variable there exist points Q whose positive trajectories tend to either equilibrium point. This implies that equilibrium selection in Brito Venditti system may depend on expectations of economic agents rather than on the history of the economy. That is, economies with identical technologies and preferences, starting from the same initial values of the state variables (history), may follow rather different equilibrium trajectories according to the economic agents' choices of the initial values of the jumping variables (expectations). Moreover we prove that the basins of attraction (two or three dimensional) of locally indeterminate equilibrium points may be very large, as they may extend up to the boundary of the system phase space.
Keywords: global and local indeterminacy; two-sector model; endogenous growth; poverty trap; global analysis (search for similar items in EconPapers)
JEL-codes: C62 E32 O41 (search for similar items in EconPapers)
Pages: 31 pages
New Economics Papers: this item is included in nep-dge and nep-fdg
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Journal Article: Global analysis and indeterminacy in a two-sector growth model with human capital (2014)
Working Paper: Global analysis and indeterminacy in a two-sector growth model with human capital (2012)
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