Stochastic Growth with Increasing Returns: Stability and Path Dependence

Abstract

The paper demonstrates global stability in a class of stochastic overlapping generations economies with increasing returns. These results are applied to the study of path dependent dynamics. In particular, for nonlinear stochastic models it is seen that persistence of the historical state and formal ergodicity may easily coincide. A new definition of path dependence is proposed that incorporates such dynamics. Show more