Abstract:Many researches showed that the growth model may display an indeterminate equilibrium when there exists the increasing return in the economy. However, these studies either adopted the separable utility between consumption and leisure that implies the unit substitution elasticity of consumption, or depended on the higher supply elasticity of labor. Based on the empirical evidence in Harrison (2003), this paper presents a two-sector (consumption, investment) economic growth model with only externalities in th...