Abstract
This chapter examines growth models in which there are multiple steady states. This class of models can explain why two countries with similar initial conditions sometimes display very different patterns of growth and development.
This chapter examines growth models in which there are multiple steady states. This class of models can explain why two countries with similar initial conditions sometimes display very different patterns of growth and development.
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Notes
- 1.
- 2.
The role of sector-specific externalities was first analyzed by Benhabib and Farmer (1996).
- 3.
The key condition for simplification of the dynamic system is that σ = α. The assumption θ = 1 is not essential for our results,but it is useful for analytical convenience.
- 4.
Ladrón-de-Guevara et al. (1997) show that if labor-leisure choice is allowed in the in the Lucas model, multiple steady states could be obtained even without externalities. However, the Lucas model without externalities is an optimal growth model, and therefore indeterminacy is not the issue in their study.
- 5.
Xie (1994) also conducted transitional analysis of the Lucas model with multiple equilibria. Since his model involves a unique steady state, the patterns of dynamics are simpler than in our model.
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Mino, K. (2017). Growth Models with Multiple Steady States. In: Growth and Business Cycles with Equilibrium Indeterminacy. Advances in Japanese Business and Economics, vol 13. Springer, Tokyo. https://doi.org/10.1007/978-4-431-55609-1_4
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