Factor Intensity Reversal and Ergodic Chaos

This paper studies a two-sector endogenous growth model with <p> labour augmenting externalities or Harrod-Neutral technical change. The <p> technologies are general and the preferences are of the CES class. If con- <p> sumers are su±ciently patient, ergodic chaos and geometric sensitivity to <p> initial conditions can emerge if either (1) there is factor intensity reversal; <p> or (2) if the consumption goods producing sector is always capital intensive. <p> The upper bound on the discount rate is determined only by the transver- <p> sality condition. If utility is linear, there can be chaos only if there is factor <p> intensity reversal