In this paper we develop a multiple equilibria one-sector R&D-based growth model, in which the key aspects are the assumption of complementarities between capitalgoods in the production function and the assumption of costly investment in capital.This second assumption is new to the R&D-based literature.The equilibrium solutions are obtained when the Preferences curve, which mirrorsconsumers’ savings decisions, and the Technology curve, which represents equilibriaon the production side, cross. The combination of the two key assumptions producesa non-linear Technology curve, which consequently crosses the Preferences curve morethan once, thus generating multiple equilibria. A numerical solutions exercise obtainstwo equilibria. Application of the stability under learning criterion allows for theidentification of the two equilibria as stable. Expectations can lead the economy toeither the equilibrium characterised by high-growth and high-interest rates, or to theequilibrium characterised by low-growth and low-interest rates.Hence, with this model, we wish to contribute to endogenous growth literature byproviding a mechanism to explain how an economy can experience multiple equilibriasituations.
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