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Indeterminacy and Labor Augmenting Externalities

  • Aditya Goenka
  • Odile Poulsen
Part of the Journal of Economics book series (JOURNECONOMICS, volume 10)

Abstract

We study a two-sector model of economic growth with labor augmenting external effects. Using general specifications of the technologies, we derive necessary and sufficient conditions for local indeterminacy. We show that, when the investment good sector is capital intensive at the private level, the necessary condition for the growth ray to be indeterminate is that the cost of forgoing consumption is not too high. When the consumption good sector is capital intensive, indeterminacy requires that the depreciation of the capital stock is not too low and that utility is not too concave.

Keywords

Indeterminacy externalities two-sector growth model factor intensities 

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Copyright information

© Springer-Verlag 2005

Authors and Affiliations

  • Aditya Goenka
    • 1
    • 2
  • Odile Poulsen
    • 3
  1. 1.Department of EconomicsUniversity of EssexWivenhoe Park, ColchesterUK
  2. 2.Department of EconomicsNational University of SingaporeSingapore
  3. 3.Department of EconomicsAarhus School of BusinessAarhus CDenmark

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