The dynamics of a growth model with externalities and increasing returns is analysed. It is proved that the assumption of maximizing individuals, if used consistently, provides an endogenous equilibrium selection mechanism that can be applied to any model with indeterminate equilibria.
Growth, externalities and indeterminate equilibria
FERRAGUTO, GIUSEPPE
2009
Abstract
The dynamics of a growth model with externalities and increasing returns is analysed. It is proved that the assumption of maximizing individuals, if used consistently, provides an endogenous equilibrium selection mechanism that can be applied to any model with indeterminate equilibria.
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