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Skills, sunspots and cycles

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  • Francesco Busato

    ()

  • Enrico Marchetti

Abstract

This paper explores the ability of a class of one-sector, multi-input models to generate indeterminate equilibrium paths, and endogenous cycles, without relying on factors' hoarding. The model presents a novel theoretical economic mechanism that supports sunspot-driven expansions without requiring upward sloping labor demand schedules. Its distinctive characteristic is that the skill composition of aggregate labor demand drives expansionary i.i.d. demand shocks. Next, the model explains the labor market dynamics from the supply side, while endogenizing the capital productivity response to changes in the aggregate labor demand composition. Last but not least, it is worth to mention that the model presents an effective shock propagation mechanism that operates into the labor market and across labor market segments through the cross elasticities of equilibrium labor demand and supplies. In this respect the model can be seen as quite general formulation (with or without aggregate increasing returns to scale) for analyzing labor market dynamics within a general equilibrium model with labor market segmentation.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Springer in its journal Journal of Economics.

Volume (Year): 97 (2009)
Issue (Month): 3 (July)
Pages: 189-215

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Handle: RePEc:kap:jeczfn:v:97:y:2009:i:3:p:189-215

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Web page: http://www.springerlink.com/link.asp?id=108909

Related research

Keywords: Indeterminacy and sunspots; Skills; O40; J24;

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Citations

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Cited by:
  1. Pedro Mazeda Gil, 2010. "Animal Spirits and the Composition of Innovation in a Lab-Equipment R&D Model with Transition," DEGIT Conference Papers c015_040, DEGIT, Dynamics, Economic Growth, and International Trade.
  2. Francesco Busato & Enrico Marchetti, 2009. "Endogenous Skill Cycles," Working Papers 127, University of Rome La Sapienza, Department of Public Economics.
  3. Martin Paldam & Erich Gundlach, 2007. "Two Views on Institutions and Development: The Grand Transition vs. the Primacy of Institutions," Kiel Working Papers 1315, Kiel Institute for the World Economy.
  4. Knud Jørgen Munk, 2006. "On the Rationale for the Use of Border Taxes in Developing Countries," Economics Working Papers 2006-12, School of Economics and Management, University of Aarhus.
  5. Knud Jørgen Munk, 2006. "Rules of Normalisation and their Importance for Interpretation of Systems of Optimal Taxation," Economics Working Papers 2006-13, School of Economics and Management, University of Aarhus.

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