Indeterminacy in a Two-sector Endogenous Growth Model with Productive Government Spending

Yunfang Hu, Ryoji Ohdoi and Koji Shimomura

No 149, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: We extend the Barro (1990) model of endogenous growth to a two-sector one which consists of pure consumption and investment goods. It is possible that the extended version has a unique balanced growth rate such that for given initial values of state variables, (i) the extended model economy grows at the unique rate right from the beginning or (ii) it has a continuum of equilibrium paths whose growth rates commonly converge to the balanced growth rate. That is, unlike the original one-sector model, it has transitional dynamics in case (ii). We also show that the effects of small changes in some parameters on the balanced growth rate and the price of the consumption good in terms of the investment good are opposite between (i) and (ii).

Keywords: Public services; Indeterminacy; A continuum of equilibrium paths; Two-sector endogenous growth (search for similar items in EconPapers)
JEL-codes: E32 E62 O41 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2004-03
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Indeterminacy in a two-sector endogenous growth model with productive government spending (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:kob:dpaper:149

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