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Department of Economics, Aarhus School of Business, University of Aarhus Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus

No 04-13:
Factor Intensity Reversal and Ergodic Chaos

Aditya Goenka () and Odile Poulsen ()

Abstract: This paper studies a two-sector endogenous growth model with

labour augmenting externalities or Harrod-Neutral technical change. The

technologies are general and the preferences are of the CES class. If con-

sumers are su±ciently patient, ergodic chaos and geometric sensitivity to

initial conditions can emerge if either (1) there is factor intensity reversal;

or (2) if the consumption goods producing sector is always capital intensive.

The upper bound on the discount rate is determined only by the transver-

sality condition. If utility is linear, there can be chaos only if there is factor

intensity reversal

Keywords: Ergodic Chaos; Two-sector endogenous growth model; Factor intensity reversal; Labor-augmenting externalities; (follow links to similar papers)

JEL-Codes: C61; D90; O41; (follow links to similar papers)

29 pages, December 10, 2004

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