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Endogenous Product Scope: Market Interlacing and Aggregate Business Cycle Dynamics

Author

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  • Oscar Pavlov

    (University of Tasmania and CAMA)

  • Mark Weder

    (Department of Economics and Business Economics, Aarhus University and CAMA)

Abstract

This paper examines a market interlacing industry configuration in general equilibrium with multi-product firms. In contrast to previous studies which utilize market segmentation, firms produce multiple products even in the complete absence of the love of variety. Product scopes are procyclical and entry and exit of firms generates an endogenous amplification mechanism. When simulated by shocks derived from the efficiency and labor wedges, the model replicates the changes in dynamics between the pre- and post 1983 periods, and explains the hours-productivity puzzle.

Suggested Citation

  • Oscar Pavlov & Mark Weder, 2021. "Endogenous Product Scope: Market Interlacing and Aggregate Business Cycle Dynamics," Economics Working Papers 2021-01, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:aarhec:2021-01
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    References listed on IDEAS

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    More about this item

    Keywords

    Multi-product firms; Business cycles;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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