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Existence, Uniqueness and Stability of Equilibrium in an Overlapping Generation Model with Monopolistic Competition and Free Entry and Exit of Firms

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  • Fernando del Rio

    (Universidade de Santiago de Compostela - Spain)

  • Omar Licandro

    (European University Institute, Florence, Italy)

Abstract

In this paper we have analyzed existence, uniqueness and stability of a steady-state equilibrium in an overlapping generations model with monopolistic competition and free entry and exit of firms. We establish a strenghtened Inada condition that is sufficient to exclude global contraction for any given set of well-behaved preferences. We also establish sufficient conditions for a non-trivial steady-state equilibrium to exist, and also sufficient conditions for its uniqueness and global stability. We show that the size of mark-up over marginal cost and the particular mix of fixed costs play a crucial role in these conditions and consequently on the dynamic behavior of the economy

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Bibliographic Info

Paper 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 2001032.

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Length: 18
Date of creation: 01 Oct 2001
Date of revision:
Handle: RePEc:ctl:louvir:2001032

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Related research

Keywords: Equilibrium; Existence; Monopolistic Competition; Overlapping Generations; Stability; Uniqueness;

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  1. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 2000. "The role of investment-specific technological change in the business cycle," European Economic Review, Elsevier, vol. 44(1), pages 91-115, January.
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  3. Aghion, Philippe & Howitt, Peter, 1994. "Growth and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 477-94, July.
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    • Jeremy Greenwood & Boyan Jovanovic, 2001. "Accounting for Growth," NBER Chapters, in: New Developments in Productivity Analysis, pages 179-224 National Bureau of Economic Research, Inc.
  5. Caballero, Ricardo J & Hammour, Mohamad L, 1996. "On the Timing and Efficiency of Creative Destruction," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 805-52, August.
  6. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932.
  7. Dale T. Mortensen & Christopher A. Pissarides, 1998. "Technological Progress, Job Creation and Job Destruction," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 733-753, October.
  8. King, Ian & Welling, Linda, 1995. "Search, unemployment, and growth," Journal of Monetary Economics, Elsevier, vol. 35(3), pages 499-507, June.
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