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Local And Global Indeterminacy In Two-Sector Models Of Endogenous Growth

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Executive Summary

In this paper the authors consider a two-sector endogenous growth model where the productions of the final good and human capital require economy-wide external effects. Assuming constant returns to scale at the private and social levels, they show that local and global indeterminacy of equilibrium paths are compatible with any values for the elasticity of inter temporal substitution in consumption and any sign for the capital intensity difference across the two sectors. This paper is concerned with the existence of multiple equilibria in two sector models of endogenous growth with economy-wide external effects 'a la Romer [28].

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