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Business cycle fluctuations and learning-by-doing externalities in a one-sector model

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  • Hippolyte d'Albis

    ()
    (Centre d'Economie de la Sorbonne - Paris School of Economics)

  • Emmanuelle Augeraud-Véron

    ()
    (MIA - Université de la Rochelle)

  • Alain Venditti

    ()
    (GREQAM et EDHEC)

Abstract

We consider a one-sector Ramsey-type growth model with inelastic labor and learning-by-doing externalities based on cumulative gross investment (cumulative production of capital goods), which is assumed, in accordance with Arrow [4], to be a better index of experience than the average capital stock. We prove that a slight memory effect characterizing the learning-by-doing process is enough to generate business cycle fluctuations through a Hopf bifurcation leading to stable periodic orbits. This is obtained for reasonable parameter values, notably for both the amount of externalities and the elasticity of intertemporal substitution. Hence, contrary to all the results available in the literature on aggregate models, we show that endogenous fluctuations are compatible with a low (in actual fact, zero) wage elasticity of the labor supply.

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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 12026.

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Length: 38 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:mse:cesdoc:12026

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Keywords: One-sector infinite-horizon model; learning-by-doing externalities; inelastic labor; business cycle fluctuations; Hopf bifurcation; local determinacy.;

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Cited by:
  1. repec:hal:journl:halshs-00721289 is not listed on IDEAS
  2. Hippolyte D'Albis & Emmanuelle Augeraud-Véron & Hermen Jan Hupkes, 2013. "Multiple Solutions in Systems of Functional Differential Equations," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00786419, HAL.
  3. Hippolyte d'Albis & Emmanuelle Augeraud-Véron & Hermen Jan Hupkes, 2012. "Backward- versus Forward-Looking Feedback Interest Rate Rules," Documents de travail du Centre d'Economie de la Sorbonne 12051, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  4. repec:hal:journl:halshs-00786419 is not listed on IDEAS

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