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Entry Dynamics, Capacity Utilisation and Productivity in a Dynamic Open Economy

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  • Marta Aloi
  • Huw D. Dixon

Abstract

This paper analyses an open economy Ramsey model with an endogenous labour supply without capital. The technology defines an optimal firm size. Changes to the number of firms is subject to adjustment costs, so that the entry dynamics is determined endogenously. We find that there is a short run transitory productivity dynamic introduced when there is imperfect competition due to changes in capacity utilization. We are able to analyze this in different contexts, including demand and technology shocks, both anticipated and unanticipated.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2002/wp-cesifo-2002-05/cesifo_wp716.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 716.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_716

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Keywords: entry; capacity utilisation; adjustment costs; Ramsey;

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References

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  1. Morrison, Catherine J., 1986. "Productivity measurement with non-static expectations and varying capacity utilization : An integrated approach," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 51-74.
  2. Craig Burnside & Martin Eichenbaum, 1994. "Factor Hoarding and the Propagation of Business Cycles Shocks," NBER Working Papers 4675, National Bureau of Economic Research, Inc.
  3. Julio J. Rotemberg & Michael Woodford, 1993. "Dynamic General Equilibrium Models with Imperfectly Competitive Product Markets," NBER Working Papers 4502, National Bureau of Economic Research, Inc.
  4. Javier Coto-Martínez & Huw D. Dixon, 2001. "Profits, Markups and Entry: Fiscal Policy in an Open Economy," CESifo Working Paper Series 550, CESifo Group Munich.
  5. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  6. Winston, Gordon C, 1974. "The Theory of Capital Utilization and Idleness," Journal of Economic Literature, American Economic Association, vol. 12(4), pages 1301-20, December.
  7. Devereux, Michael B & Head, Allen C & Lapham, Beverly J, 1996. "Monopolistic Competition, Increasing Returns, and the Effects of Government Spending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 233-54, May.
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Cited by:
  1. Partha Sen, 2009. "Fixed Costs, The Balanced Budget Multiplier And Welfare," The Japanese Economic Review, Japanese Economic Association, vol. 60(3), pages 395-404.
  2. Giovanni Lombardo, . "Sticky Prices, Markup and the Business Cycle: Some Evidence," Discussion Papers 01/06, Department of Economics, University of York.
  3. Lukach, R. & Plasmans, J.E.J., 2002. "Measuring Knowledge Spillovers using Patent Citations: Evidence from the Belgian Firm's Data," Open Access publications from Tilburg University urn:nbn:nl:ui:12-92281, Tilburg University.
  4. Bipasa Datta & Huw Dixon, 2002. "Technological Change, Entry, and Stock-Market Dynamics: An Analysis of Transition in a Monopolistic Industry," American Economic Review, American Economic Association, vol. 92(2), pages 231-235, May.
  5. Bipasa Datta & Huw D. Dixon, 2002. "Technological Change, Entry and Stock Market Dynamics: An Analysis of Transition in a Monopolistic Economy," CESifo Working Paper Series 641, CESifo Group Munich.

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