Welfare Implications and Equilibrium Indeterminacy in a Two-sector Growth Model with Consumption Externalities

Been-Lon Chen, Yu-Shan Hsu () and Kazuo Mino
Additional contact information
Yu-Shan Hsu: Department of Economics, National Chung Cheng University

No 13-A008, IEAS Working Paper : academic research from Institute of Economics, Academia Sinica, Taipei, Taiwan

Abstract: In one-sector neoclassical growth models, consumption externalities lead to an inefficient allocation in a steady state and indeterminate equilibrium toward a steady state only if there is a labor-leisure tradeoff. This paper shows that in a two-sector neoclassical growth model, even without a labor-leisure tradeoff, consumption spillovers easily lead to an inefficient allocation in a steady state and indeterminate equilibrium toward a steady state. Negative consumption spillovers that yield over-accumulation of capital in a one-sector model may lead to under-accumulation or an over-accumulation of capital in two-sector models depending on the relative capital intensity between sectors. Moreover, a two-sector model economy with consumption externalities is less stabilized than an otherwise identical one-sector model economy.

Keywords: two-sector model; consumption externalities; efficiency; indeterminacy (search for similar items in EconPapers)
JEL-codes: E21 E32 O41 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2013-08
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econ.sinica.edu.tw/~econ/pdfPaper/13-A008.pdf (application/pdf)

Related works:
Journal Article: WELFARE IMPLICATIONS AND EQUILIBRIUM INDETERMINACY IN A TWO-SECTOR GROWTH MODEL WITH CONSUMPTION EXTERNALITIES (2015)
Working Paper: Welfare Implications and Equilibrium Indeterminacy in a Two-sector Growth Model with Consumption Externalities (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sin:wpaper:13-a008

Access Statistics for this paper

More papers in IEAS Working Paper : academic research from Institute of Economics, Academia Sinica, Taipei, Taiwan Contact information at EDIRC.
Bibliographic data for series maintained by HsiaoyunLiu ().