Capital Externalities in Two-Sector Models

Alain Venditti (1)

1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille

We consider a two-sector economy with positive capital externalities and constant social returns. We first show that local indeterminacy does not require external
effects from labor but is fundamentaly based on externalities derived from capital in the investment good sector. Second, we show that the external effects in the investment good sector has to be characterized by a low enough amount of capital stock from the
consumption good sector. In other words, the existence of multiple equilibria is ruled out if the externalities are too intersectoral.

Mots clés: Infinite horizon models; sector-specific and intersectoral capital externalities; constant social returns; indeterminacy

Domaines: Economies et finances

Alain Venditti. Capital Externalities in Two-Sector Models. 2006. ⟨halshs-00410761⟩