We examine the dimension reduction method and prove that it could be misleading if we try to get some insight into the dynamics of the original system from the dynamics of the transformed system alone. The reduced system seemingly may give rise to a continuum multiplicity of steady states when,...

This paper provides the complete closed-form solution to the Lucas two-sector model of endogenous growth. We study the issues of existence, uniqueness, multiplicity, positivity, transitional dynamics and long-run growth, related to the competitive equilibrium paths. We identify the parameter...