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Published on: September 28, 2020
Fractal attractors in economic growth models with random pollution externalities
Davide La Torre1, Simone Marsiglio2, Fabio Privileggi3
1Dubai Business School, University of Dubai, Dubai, UAE, and Department of Economics, Management, and Quantitative Methods, University of Milan, Milano 20122, Italy.
Abstract:
We analyze a discrete time two-sector economic growth model where the production technologies in the final and human capital sectors are affected by random shocks both directly (via productivity and factor shares) and indirectly (via a pollution externality). We determine the optimal dynamics in the decentralized economy and show how these dynamics can be described in terms of a two-dimensional affine iterated function system with probability. This allows us to identify a suitable parameter configuration capable of generating exactly the classical Barnsley's fern as the attractor of the log-linearized optimal dynamical system.
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