Eventual periodicity in the two-sector RSL model: equilibrium vis-à-vis optimum growth

This paper investigates the well-known phenomenon of eventual periodicity of Li–Yorke chaos in the context of the two-sector Robinson–Shinkai–Leontief model of economic growth. It locates its (i) presence under specific parameter restrictions that include the extreme classical saving specification,...

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Bibliographic Details
Published in:Economic theory 2021-09, Vol.72 (2), p.615-639
Main Authors: Deng, Liuchun, Fujio, Minako, Khan, M. Ali
Format: Article
Language:English
Subjects:
Capital stock
Economic growth
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Equilibrium
Game Theory
Growth models
Investments
Microeconomics
Optimization
Public Finance
Research Article
Social and Behav. Sciences
Specification
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Summary:This paper investigates the well-known phenomenon of eventual periodicity of Li–Yorke chaos in the context of the two-sector Robinson–Shinkai–Leontief model of economic growth. It locates its (i) presence under specific parameter restrictions that include the extreme classical saving specification, and its (ii) absence in savings generated by the optimization of an infinitely-lived representative agent with perfect foresight. These results in which rare events, chaos and stability are all brought together under the rubric of upward and downward inertia, while of substantive economic interest of their own, also highlight phenomena in economic dynamics that may go towards a clearer definitional understanding of chaotic systems.
ISSN:0938-2259
1432-0479
DOI:10.1007/s00199-020-01301-0