Human Capital Formation and Patterns of Growth with Multiple Equilibria

This paper studies the relation between patterns of long-term economic growth and indeterminacy of equilibrium in an endogenous growth model with human capital formation. By introducing sector-specific externalities and a non-separable utility function into the Lucas model, we show that multiple balanced growth equilibria and indeterminacy of converging paths may emerge even in the absence of social increasing returns. Our results indicate that the standard endogenous growth model with small modifications would be useful to consider the reason why we often observe diverse growth performances among the countries with similar economic environments.