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Type: Journal article
Title: Capital-labor substitution, sector-specific externalities, and indeterminacy
Author: Photphisutthiphong, N.
Weder, M.
Citation: Macroeconomic Dynamics, 2012; 16(SUPPL. 3):411-421
Publisher: Cambridge Univ Press
Issue Date: 2012
ISSN: 1365-1005
Statement of
Nopphawan Photphisutthiphong and Mark Weder
Abstract: This paper examines the effect of the elasticity of technological substitution on the existence of equilibrium indeterminacy in two-sector economies. Following recent empirical evidence, the elasticity of substitution between capital and labor is below unity and we find that this requires a higher degree of productive externalities in order to still be able to produce indeterminate equilibria. However, empirically realistic rates of substitution do not rule out indeterminacy.
Keywords: Two-Sector Models
CES Production Functions
Rights: © Cambridge University Press 2012
DOI: 10.1017/S1365100510000994
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Economics publications

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