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Transitional Dynamics and Indeterminacy of Equilibria in an Endogenous Growth Model with a Public Input
Author(s) -
Palivos Theodore,
Yip Chong K.,
Zhang Junxi
Publication year - 2003
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00177
Subject(s) - leapfrogging , indeterminacy (philosophy) , economics , endogenous growth theory , overlapping generations model , growth model , production (economics) , dynamics (music) , microeconomics , neoclassical economics , keynesian economics , mathematical economics , market economy , economic growth , physics , quantum mechanics , human capital , acoustics
The authors analyze an endogenous growth model with economy–wide increasing returns, in which a public input is essential for private production. Within such a framework, it is shown that a continuum of equilibria and global indeterminacy can arise for reasonable parameter values, simply due to the presence of endogenous public policy. This can potentially account for “leapfrogging” or retroceding growth experiences. It is demonstrated how fiscal policy can serve as a selection device among different convergent paths.