Characterization of Equilibrium Paths in a Two-Sector Economy with CES Production Functions and Sector-Specific Externality

Miki Matsuo (1) , Kazuo Nishimura (1) , Tomoya Sakagami (2) , Alain Venditti (3)

1 Kyoto University
2 Kumamoto Gakuen University
3 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille

In this paper, we study a two-sector CES economy with sector-specific externality as described by Nishimura and Venditti (2004). We characterize the equilibrium paths in the case that allows negative externality as that equlibrium paths were not explicitly discussed by Nishimura and Venditti. We show how the degree of externality affects the local behavior of the equilibrium path around the steady state.

Mots clés: Two-sector economy; sector-specific externalities; indeterminacy; capital-labor substitution

Domaines: Economies et finances

Miki Matsuo, Kazuo Nishimura, Tomoya Sakagami, Alain Venditti. Characterization of Equilibrium Paths in a Two-Sector Economy with CES Production Functions and Sector-Specific Externality. 2008. ⟨halshs-00281642⟩