Irreversibility, Uncertainty and Underemployment Equilibria
AbstractIn a competitive overlapping generation model, underutilization of labor and equipment can be due to the combinaison of irreversibility of human capital, physical capital and technology with idiosyncratic productivity shocks. Irreversibilities and uncertainty generate an inefficient allocation of resources among sectors, which takes the form of underemployment and underutilization of capacities at the aggregate level and affects the equilibrium path of capital. We provide examples in which this missallocation, called structural "mismatch", can be responsible, a.o., for an "inescapable poverty trap", or for periodic orbits generating endogenous fluctuations in underemployment.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1994028.
Date of creation: 01 Nov 1993
Date of revision: 00 Oct 1994
underemployment; underutilization; irreversibility; poverty trap; endogenous fluctuations;
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- D90 - Microeconomics - - Intertemporal Choice - - - General
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- Fagnart, J.-Fr. & Licandro, O. & Sneessens, H. R., 1995.
"Capacity Utilization and Market Power,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
1996006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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