Sector-Specific Externalities and Endogenous Growth under Social Constant Returns

Mino, Kazuo (2000): Sector-Specific Externalities and Endogenous Growth under Social Constant Returns.

Abstract

By examining two-sector models of endogenous growth with physical and human capital, this paper demonstrates that indeterminacy of equilibrium may emerge even in the absence of social increasing returns. The first model we examine assumes that both final good and new human capital production sectors employ physical as well as human capital under social constant returns but private decreasing returns due to the presence of sector-specific externalities. It is shown that a small divergence between private and social factor intensity conditions generates indeterminacy of equilibrium rather easily even under constant returns. I addition, we show that introducing endogenous labor supply may enhance the possibility of indeterminacy. Some extensions and intuitive interpretation of the indeterminacy conditions are also presented.

• Item Type: MPRA Paper
• Language: English
• Keywords: social constant returns, indeterminacy of equilibrium, endogenous growth
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E23 - Production; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E13 - Neoclassical

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