Summary.
A simple overlapping generations model with investment gestation lags is constructed. The model shows that, if the technology is of the AK type with capital-deepening externalities, the existence of investment gestation lags always generates permanent cyclical fluctuations in the economic growth rate. The mean growth rate is shown to be positive if the external effect is strong. The model also shows that, if the production technology takes the Cobb-Douglas form, there exists a unique steady state in which the economy exhibits neither cyclical fluctuations nor long-run growth.
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Received: 3 July 2003, Revised: 3 December 2003,
JEL Classification Numbers:
E32, B13.
Correspondence to: Akiomi Kitagawa
Akiomi Kitagawa, Akihisa Shibata: The authors would like to thank Yasushi Iwamoto, Kazuo Mino, an anonymous referee and seminar participants at the Macroeconomics Workshop for their helpful comments and suggestions. Financial support from the Ministry of Education, Culture, Sports, Science and Technology of Japan is gratefully acknowledged.
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Kitagawa, A., Shibata, A. Endogenous growth cycles in an overlapping generations model with investment gestation lags. Economic Theory 25, 751–762 (2005). https://doi.org/10.1007/s00199-003-0458-0
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DOI: https://doi.org/10.1007/s00199-003-0458-0