Transitional Dynamics and Indeterminacy of Equilibria in an Endogenous Growth Model with a Public Input |
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Authors: | Theodore Palivos Chong K Yip & Junxi Zhang |
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Institution: | Louisiana State University, USA and University of Ioannina, Greece;, The Chinese University of Hong Kong;, University of Hong Kong |
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Abstract: | 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. |
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