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Endogenous productivity and multiple steady states

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  • Levon Barseghyan
  • Riccardo DiCecio

Abstract

We endogenize total factor productivity in a neoclassical model with increasing returns to scale. We obtain multiple steady-state equilibria with an arbitrarily small degree of increasing returns to scale. While the most productive firms operate across all the steady states, in a poverty trap less productive firms operate as well. This results in lower average firm productivity and total factor productivity. A calibrated version of our model displays sizable differences in TFP and output across steady state equilibria.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2008-023.

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Date of creation: 2008
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Handle: RePEc:fip:fedlwp:2008-023

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Keywords: Industrial productivity;

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Cited by:
  1. Riccardo DiCecio & Levon Barseghayn, 2009. "Entry Costs, Misallocation, and Cross-Country Income and TFP Differences," 2009 Meeting Papers 428, Society for Economic Dynamics.
  2. Barseghyan, Levon & DiCecio, Riccardo, 2011. "Entry costs, industry structure, and cross-country income and TFP differences," Journal of Economic Theory, Elsevier, vol. 146(5), pages 1828-1851, September.

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