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The impact of heterogeneity on indeterminacy

Ghiglino, Christian and Olszak-Duquenne, Marielle The impact of heterogeneity on indeterminacy. [UNSPECIFIED]

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The aim of the paper is to explore the link between agent's heterogeneity and indeterminacy in a general equilibrium economy. The framework is provided by the two-sector growth model with technological externalities of Boldrin and Rustichini (1994) in which heterogeneous agents are introduced. We first show that the occurrence of indeterminacy depends on the distribution in labor endowments and in shares on initial capital among the agents as well as on preferences and technology. We find that the sign of the effect of heterogeneity on indeterminacy is not pinned down by the standard properties of preferences, a fact that might be surprising in view of some recent results (as in Herrendorf et al. (2000)). However, when risk aversion is a concave or a slightly convex function, the heterogeneity is a factor that opposes the external effects in generating indeterminacy.

Uncontrolled Keywords: D30, D50, D90, O41, Endogenous growth, Heterogeneity, Indeterminacy, Inequalities
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 16 Jul 2012 18:20
Last Modified: 17 Aug 2017 18:10

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