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Business cycle fluctuations and learning-by-doing externalities in a one-sector model

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  • d’Albis, Hippolyte
  • Augeraud-Veron, Emmanuelle
  • Venditti, Alain

Abstract

We consider a one-sector Ramsey-type growth model with inelastic labor and learning-by-doing externalities based on cumulative gross investment (cumulative production of capital goods), which is assumed, in accordance with Arrow (1962), to be a better index of experience than the average capital stock. We prove that a slight memory effect characterizing the learning-by-doing process is enough to generate business cycle fluctuations through a Hopf bifurcation leading to stable periodic orbits. This is obtained for reasonable parameter values, notably for both the amount of externalities and the elasticity of intertemporal substitution. Hence, contrary to all the results available in the literature on aggregate models, we show that endogenous fluctuations are compatible with a low (in actual fact, zero) wage elasticity of the labor supply.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 48 (2012)
Issue (Month): 5 ()
Pages: 295-308

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Handle: RePEc:eee:mateco:v:48:y:2012:i:5:p:295-308

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Web page: http://www.elsevier.com/locate/jmateco

Related research

Keywords: One-sector infinite-horizon model; Learning-by-doing externalities; Inelastic labor; Business cycle fluctuations; Hopf bifurcation; Local determinacy;

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References

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
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Citations

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Cited by:
  1. Hippolyte D'Albis & Emmanuelle Augeraud-Véron & Hermen Jan Hupkes, 2013. "Multiple Solutions in Systems of Functional Differential Equations," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00786419, HAL.
  2. Hippolyte d'Albis & Emmanuelle Augeraud-Véron & Hermen Jan Hupkes, 2012. "Backward- versus Forward-Looking Feedback Interest Rate Rules," Documents de travail du Centre d'Economie de la Sorbonne 12051, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  3. Hippolyte D'Albis & Emmanuelle Augeraud-Véron & Hermen Jan Hupkes, 2013. "Multiple Solutions in Systems of Functional Differential Equations," Post-Print halshs-00786419, HAL.
  4. Hippolyte D'Albis & Emmanuelle Augeraud-Véron & Hermen Jan Hupkes, 2012. "Backward- versus Forward-Looking Feedback Interest Rate Rules," Post-Print halshs-00721289, HAL.

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