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History dependence without unstable steady state: a non-differentiable framework

Authors
Journal
Journal of Mathematical Economics
0304-4068
Publisher
Elsevier
Publication Date
Volume
39
Issue
8
Identifiers
DOI: 10.1016/s0304-4068(03)00083-1
Keywords
  • History Dependence
  • Dynamic Economics
  • Skiba Threshold
Disciplines
  • Economics

Abstract

Abstract In this paper, a non-differentiability is identified as a new mechanism that creates history dependence in dynamic economic models. A unique characteristic is that this occurs although no unstable steady state exists. This is shown by studying a capital accumulation model in which the revenue function exhibits a kink. It can be expected that history dependence will occur in other models with non-differentiabilities as well.

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