Bifurcation Analysis Applied to Structural Economic Dynamics with a Choice of Technique: A Numerical Example

Abstract

This article illustrates the application of bifurcation analysis to structural economic dynamics with a choice of technique. A numerical example of the Samuelson-Garegnani model is presented in which technical progress is introduced. Examples of temporal paths through the parameter space illustrate variations of the wage frontier. A single technique is initially uniquely cost-minimizing for all feasible rates of profits. Eventually, the technique for which coefficients of production decrease at the fastest rate is always cost-minimizing. This example illustrates possible variations in the existence of Sraffa effects, which arise during the transition between these positions.

Keywords: Choice of technique, Structural dynamics, bifurcations, switch points, technological change

JEL Classification: B51, C67, D24