Abstract
ABSTRACTMany authors have demonstrated that stability is achieved when technical coefficient flexibility (induced by changes in factor prices) is introduced into a growth cycle model.Since in the real world induced technical change coexists with cycles and irregular growth, the purpose of this article is to prove that removing some of the more unconvincing assumptions in these models makes those phenomena quite plausible. More precisely, the classical extreme hypothesis about accumulation is abandoned in favour of an autonomous investment function. Secondly, myopic unit‐cost‐reduction maximisation is modified by introducing uncertainty and innovating firms’risk aversion.Bifurcation techniques are used to detect the existence of closed orbits (cycles) in the three‐dimensional differential system thus obtained. Journ. Ec. Lit. class. numb. 111, 131, 213, 621.
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