Indeterminacy in a model with sector-specific externalities

✍ Scribed by Sharon G Harrison

• Publisher: Elsevier Science
• Year: 2001
• Tongue: English
• Weight: 201 KB
• Volume: 25
• Category: Article
• ISSN: 0165-1889
• DOI: 10.1016/s0165-1889(99)00040-8

✦ Synopsis

I examine a model with two sectors of production: consumption and investment. In the model, indeterminacy of equilibria results due to the presence of small sector-speci"c externalities in production. In fact, I "nd that indeterminacy results with a certain, minimum value of the externality in the investment sector, even with no externality in the consumption sector. I "nd that the indeterminacy properties of the model vary, depending on the form of the utility function. For example, with utility that is logarithmic in consumption, these properties are completely independent of the value of the externality in the consumption sector.