Growth dynamics and returns to scale: Bifurcation analysis

We investigate the dependence of the dynamic behavior of an endogenous grow th model on the degree of returns to scare. We focus on a simple (but repre sentative) growth model with publicly funded inventive activity. We show th at constant returns to reproducible Factors (the leading case in the endoge nous growth literature) is a bifurcation point, and that it has the charact eristics of a transcritical bifurcation. The bifurcation involves the bound ary of the state space, making it difficult to formally verify this classif ication. For a special case, we provide a transformation that allows Formal classification by existing methods. We discuss the new methods that would be needed for Formal verification of transcriticality in a broader class of models. Journal of Economic Literature Classification Numbers: O41, O30. ( C) 2001 Acadeinic Press.