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The Cyclical Behaviour of Wages and Profits under Imperfect Competition

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Abstract

We build a simple dynamic model of the business cycle with monopolistically competitive firms. With simple assumptions concerning firm entry and exit, the model can explain some important stylised facts of the business cycle which standard real business cycle models with perfect competition cannot predict. These include the cyclical behaviour of the shares of capital and labour income in total income, the volatilities of these shares, and the pattern of net firm creation. These predictions are robust to whether the principle source of the business cycle is aggregate supply shocks or aggregate demand shocks. Nous présentons un modèle dynamique simple du cycle d'affaires avec concurrence monopolistique entre les firmes. Sous des hypothèses simples concernant l'entrée et la sortie des firmes, le modèle peut expliquer certains faits caractéristiques du cycle économique, que les modèles standard du cycle avec concurrence parfaite ne peuvent pas prédire. Ces faits caractéristiques comprennent les fluctuations des parts des revenus du travail et du capital dans le revenu total, les variabilités de ces parts, et le comportement dynamique de la création nette de firmes. Ces prédicitions sont robustes face à des chocs technologiques affectant l'offre ou des chocs de demande.

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Bibliographic Info

Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 18.

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Date of creation: Aug 1993
Date of revision: Jun 1996
Handle: RePEc:cre:crefwp:18

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Keywords: business cycles; imperfect competition; dynamic models;

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References

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  1. Ambler, S. & Cardia, E. & Phaneuf, L., 1991. "contracts de salaire, croissance endogene et fluctuations," Cahiers de recherche 9124, Universite de Montreal, Departement de sciences economiques.
  2. Ambler, Steve & Paquet, Alain, 1996. "Fiscal spending shocks, endogenous government spending, and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 237-256.
  3. Steve Ambler & Alain Paquet, 1993. "Fiscal Spending Shocks, Endogenous Government Spending and Real Business Cycles," Cahiers de recherche CREFE / CREFE Working Papers 14, CREFE, Université du Québec à Montréal.
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Cited by:
  1. Alain Gabler, 2007. "Sector-specific Markup Fluctuations and the Business Cycle," Economics Working Papers ECO2007/25, European University Institute.
  2. Jinill Kim, 1997. "Three sources of increasing returns to scale," Finance and Economics Discussion Series 1997-18, Board of Governors of the Federal Reserve System (U.S.).
  3. Macallan, Clare & Millard, Stephen & Parker, Miles, 2008. "The cyclicality of mark-ups and profit margins for the United Kingdom: some new evidence," Bank of England working papers 351, Bank of England.
  4. repec:hal:cesptp:hal-00680634 is not listed on IDEAS
  5. Bilbiie, Florin Ovidiu & Ghironi, Fabio & Melitz, Marc J, 2011. "Endogenous Entry, Product Variety, and Business Cycles," CEPR Discussion Papers 8564, C.E.P.R. Discussion Papers.
  6. Enchuan Shao & Pedro Silos, 2008. "Firm entry and labor market dynamics," Working Paper 2008-17, Federal Reserve Bank of Atlanta.
  7. Florin O. Bilbiie & Fabio Ghironi & Marc J. Melitz, 2007. "Monetary Policy and Business Cycles with Endogenous Entry and Product Variety," NBER Working Papers 13199, National Bureau of Economic Research, Inc.
  8. Ríos-Rull, José-Víctor & Santaeulàlia-Llopis, Raül, 2010. "Redistributive shocks and productivity shocks," Journal of Monetary Economics, Elsevier, vol. 57(8), pages 931-948, November.
  9. Kim, Jinill, 2004. "What determines aggregate returns to scale?," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1577-1594, June.
  10. Cook, David, 2001. "Time to enter and business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 25(8), pages 1241-1261, August.
  11. Shao, Enchuan & Silos, Pedro, 2013. "Entry costs and labor market dynamics," European Economic Review, Elsevier, vol. 63(C), pages 243-255.
  12. Burda, Michael C. & Weder, Mark, 1998. "Endogenes Wachstum, gleichgewichtige Arbeitslosigkeit und persistente Konjunkturzyklen," SFB 373 Discussion Papers 1999,9, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  13. Hernando Zuleta & Andrew T. Young, 2007. "Labor's shares - aggregate and industry: accounting for both in a model of unbalanced growth with induced innovation," DOCUMENTOS DE TRABAJO 003105, UNIVERSIDAD DEL ROSARIO.
  14. Fedotenkov, I., 2012. "Pensions and ageing in a globalizing world. International spillover effects via trade and factor mobility," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5590843, Tilburg University.
  15. Hernando Zuleta, 2007. "Biased technological change, human capital and factor shares," DOCUMENTOS DE TRABAJO 004380, UNIVERSIDAD DEL ROSARIO.

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