Skills, sunspots and cycles
AbstractThis 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.
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2006-07.
Date of creation: 31 May 2006
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Web page: http://www.econ.au.dk/afn/
Indeterminacy and Sunspots; Skills;
Other versions of this item:
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-10 (All new papers)
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