Multiple equilibria and global indeterminacy in an endogenous growth model with congestible public goods

Bella, Giovanni

;Mattana, Paolo

2019-01-01

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Abstract

This paper extends the findings in Chen and Lee (2007) to show that the use of congestible public goods can produce both local and global indeterminacy in a two‐sector endogenous growth model with productive public services financed by income taxation. Basically, we observe the effects on growth rates by changing parameters, and compare the case of a single steady‐state with the emergence of dual steady‐states, identifying the feasible ways to avoid a possible low‐growth poverty trap. The novelty of our analysis is to detect the presence of global indeterminacy by making use of the Bogdanov‐Takens bifurcation theorem. Some examples are also provided to achieve concrete policy implications.