Entry and the accumulation of capital: a two state-variable extension to the Ramsey model
AbstractIn this paper we consider the entry and exit of firms in a dynamic general equilibrium model with capital. At the firm level, there is a fixed cost combined with increasing marginal cost, which gives a standard U-shaped cost curve with optimal firm size. Entry is determined by a free entry condition such that the costs of entry are equal to the present value of incumbent firms, the cost of entry (exit) depends on the flow of entry (exit). Then equilibrium is saddle-point stable and the stable manifold is two-dimensional. Transitional dynamics can, under certain circumstances, be non-monotonic.
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Bibliographic InfoPaper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2007/16.
Length: 60 pages
Date of creation: Jun 2007
Date of revision: Oct 2007
Publication status: Published in International Journal of Economic Theory, , 5, 333-357
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Entry; dynamics; Ramsey;
Other versions of this item:
- Paulo Brito & Huw Dixon, 2009. "Entry and the accumulation of capital: A two state variable extension to the Ramsey model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 5(4), pages 333-357.
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-23 (All new papers)
- NEP-BEC-2007-06-23 (Business Economics)
- NEP-COM-2007-06-23 (Industrial Competition)
- NEP-DGE-2007-06-23 (Dynamic General Equilibrium)
- NEP-ENT-2007-06-23 (Entrepreneurship)
- NEP-MAC-2007-06-23 (Macroeconomics)
- NEP-MIC-2007-06-23 (Microeconomics)
- NEP-TID-2007-06-23 (Technology & Industrial Dynamics)
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- Pedro Rui Mazeda Gil & Paulo Brito & Óscar Afonso, 2008. "A Model of Quality Ladders with Horizontal Entry," FEP Working Papers 296, Universidade do Porto, Faculdade de Economia do Porto.
- Pedro Gil, 2013.
"Animal spirits and the composition of innovation in a lab-equipment R&D model with transition,"
Journal of Economics,
Springer, vol. 108(1), pages 1-33, January.
- 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.
- Brito, Paulo & Dixon, Huw, 2013.
"Fiscal policy, entry and capital accumulation: Hump-shaped responses,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 37(10), pages 2123-2155.
- Brito, Paulo & Dixon, Huw, 2012. "Fiscal policy, entry and capital accumulation: hump-shaped responses," Cardiff Economics Working Papers E2012/7, Cardiff University, Cardiff Business School, Economics Section.
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