Indeterminacy and Labour Augmenting Externalities

Odile Poulsen, Aditya Goenka

Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)peer-review


We study a two-sector model of economic growth with labor augmenting external effects. Using general specifications of the technologies, we derive necessary and sufficient conditions for local indeterminacy. We show that, when the investment good sector is capital intensive at the private level, the necessary condition for the growth ray to be indeterminate is that the cost of forgoing consumption is not too high. When the consumption good sector is capital intensive, indeterminacy requires that the depreciation of the capital stock is not too low and that utility is not too concave.
Original languageEnglish
Title of host publicationGrowth, Trade and Economic Institutions
EditorsTapio Palokangas, Bjarne S. Jensen, Dieter Bös, Giacomo Corneo, Reino Hjerppe, Juha Honkatukia
Number of pages24
Publication statusPublished - 2005

Publication series

NameJournal of Economics Zeitschrift für Nationalökonomie Supplementum
ISSN (Print)0084-537X

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