Scandinavian Working Papers in Economics

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

No 04-13: Factor Intensity Reversal and Ergodic Chaos

Aditya Goenka () and Odile Poulsen ()
Additional contact information
Aditya Goenka: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Odile Poulsen: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

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

JEL-codes: C61; D90; O41

29 pages, December 10, 2004

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04-13_agodp.pdf PDF-file 

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