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Complex dynamics in a two-sector Solow–Swan Model

Published online by Cambridge University Press:  05 May 2026

Olaf Schmitz  and
Jan Wenzelburger Open the ORCID record for Jan Wenzelburger [Opens in a new window]
Olaf Schmitz
Affiliation:
VPV Versicherungen, Mittlerer Pfad 19, 70499 Stuttgart, Germany
Jan Wenzelburger*
Affiliation:
Faculty of Business Studies and Economics, RPTU University of Kaiserslautern-Landau, Kaiserslautern, Germany
*
Corresponding author: Jan Wenzelburger; Email: jan.wenzelburger@rptu.de
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Abstract

This article investigates the dynamics of a parsimonious extension of the standard neo-classical growth model introduced by Solow (1956) and Swan (1956) to a two-sector growth model in discrete time. We identify the economy’s propensity to invest as a market mechanism that may cause endogenous business cycles and complex dynamics, provided that the elasticity of factor substitution in producing consumption goods is sufficiently small. The theoretical results are supported by numerical evidence for topological chaos and strange attractors.

Keywords

Two-sector growth modelsfactor-intensity reversalsendogenous business cyclescomplex dynamicstwo-sector modelsC30C63E13E32

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Type
Articles
Information
Macroeconomic Dynamics , Volume 30 , 2026 , e30
Copyright
© The Author(s), 2026. Published by Cambridge University Press

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