Congestible public goods and local indeterminacy: A two-sector endogenous growth model

Chen, Been-Lon; Lee, Shun-Fa

doi:10.1016/j.jedc.2006.08.004

Cited by 20 publications

(32 citation statements)

References 34 publications

(43 reference statements)

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“…We find that equilibrium paths are determinate in both kinds of taxing regimes. Such a result is consistent with the finding in Chen and Lee (2007). Chen and Lee (2007) have shown that in a two-sector Lucas model when productive public capital is introduced, equilibrium paths are always determinate unless there is a congestion effect in the use of public services.…”

supporting

confidence: 91%

“…Such a result is consistent with the finding in Chen and Lee (2007). Chen and Lee (2007) have shown that in a two-sector Lucas model when productive public capital is introduced, equilibrium paths are always determinate unless there is a congestion effect in the use of public services. Thus, our conclusion in favor of earmarked taxes in terms of economic stability is applicable to the environment where labor cannot be used to form human capital.…”

supporting

confidence: 91%

“…This type of model has been extended by Benhabib and Perli (1994), Bond, et al (1996), Mino (1996), Benhabib, etal (2000, Ben-Gad (2003) and Chen and Lee (2007). In this type of two-sector model, there is not only physical capital but also human capital.…”

mentioning

confidence: 99%

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General Fund Financing, Earmarking, Economic Stabilization, and Welfare

Chen

Lee

2009

Public Finance Review

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Discussion has been made concerning pros and cons of the ways of financing public projects via either earmarking or general fund based upon a public finance approach. The paper studies the implications of desirability of earmarked and general fund based upon economic stabilization in a two-sector growth model. Regardless of the nature of public goods, earmarked tax contributes to aggregate stabilization, while general fund may be destabilizing and cause fluctuations. The underlying mechanism in favor of earmarked taxes against general fund is that general fund creates intersectoral externalities and strategic complementarities that is sufficiently large to exert endogenously persistent and recurring fluctuations in aggregate activities in the absence of shocks to fundamentals. Earmarked taxing generates only sector-specific externalities that are too small to exert local indeterminacy. In a calibrated version, we compute the level of long-run welfare and the results reflect favorably upon the use of earmarked taxing.

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supporting

confidence: 91%

supporting

confidence: 91%

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General Fund Financing, Earmarking, Economic Stabilization, and Welfare

Chen

Lee

2009

Public Finance Review

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“…Other works focus on the role played by negative externalities in producing local indeterminacy. For example, Chen and Lee [21] consider a social constant returns economy where a congestible public good exerts positive sector-specific externalities, while a congestion effect generates negative aggregate externalities. Itaya [29] shows how pollution may affect indeterminacy results in a one-sector growth model with social increasing returns.…”

Section: Introductionmentioning

confidence: 99%

Poverty trap and global indeterminacy in a growth model with open-access natural resources

Antoci

Galeotti

Russu

2011

Journal of Economic Theory

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In this paper we use global analysis techniques to analyze an economic growth model with environmental negative externalities, giving rise to a three-dimensional dynamic system (the framework is the one introduced by Wirl (1997) [53]). The dynamics of our model admits a locally attracting stationary state P * 1 , which is, in fact, a poverty trap, coexisting with another stationary state P * 2 possessing saddle-point stability. Global dynamical analysis shows that, under some conditions on the parameters, if the initial values of the state variables are close enough to the coordinates of P * 1 , then there exists a continuum of equilibrium trajectories approaching P * 1 and one trajectory approaching P * 2 . Therefore, our model exhibits global indeterminacy, since either P * 1 or P * 2 can be selected according to agent expectations. Moreover, we prove that conditions guaranteeing the attractivity of P * 1 also imply the saddle-point stability of P * 2 . However, when P * 1 is not attractive, numerical simulations show the possible existence of one or two limit cycles: an attractive one surrounding P * 1 and one endowed with a two-dimensional stable manifold surrounding P * 2 . © 2010 Elsevier Inc. All rights reserved. Open-access natural resources $ The authors wish to thank Tadashi Shigoka for his precious comments to a preliminary version of the article together with an associate editor and two referees of this journal, whose remarks and suggestions have allowed a substantial improvement of the work.

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“…Some of these include Rivas (2003), Eicher and Turnovsky (2000), Yakita (2004), Ohdoi (2007), Chen and Lee (2007) and Park and Philippopoulos (2002). The main advantage of modelling infrastructure as a flow variable is that it produces highly tractable models (Fisher and Turnovsky 2013).…”

Section: Modelling Infrastructure As a Flow Variablementioning

confidence: 99%