Equilibrium dynamics in discrete-time endogenous growth models with social constant returns (Q2460228)

This paper reexamines the property of local dynamics in a class of two-sector endogenous growth models with socially constant-returns production technologies with positive sector-specific externalities. Within this class of models in continuous time, two fundamental propositions have been established: (i) the balanced growth path is locally determinate iff the factor intensity rankings in the private and social sense are consistent; and, (ii) dynamic indeterminacy emerges iff the consumable good production uses pure (human) capital more intensively in the private (physical) sense but uses consumable (physical) capital intensive in the social (value) sense. This paper shows that in discrete time, both propositions fail to hold.