Global indeterminacy in an endogenous-growth model with public capital

This paper studies the patterns of growth in an endogenous-growth model where the labor supply is endogenous and sustained growth arises because the services derived from public capital increase the economic productivity. It is assumed that these services are congested by the number of households in the economy but they are not congested by the units of time that each household devotes to work. With this assumption, the dynamic equilibrium exhibits multiple balanced-growth paths, local and global indeterminacy, and limit cycles under some plausible fiscal policies. Our analysis points out that a large lump-sum Lax is a necessary condition to obtain this complex equilibrium dynamic behavior.