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Uniqueness and Stability of Equilibria in a Model with Endogenous Markups and Labor Supply

  • Yangru Wu

    ()

    (Department of Finance & Economics, Rutgers Business School, Rutgers University)

  • Junxi Zhang

    ()

    (School of Economics and Finance, University of Hong Kong)

The presence of public policy in models with multiple steady states is known to be capable of reducing the set of equilibria. This paper shows that in a simple growth model with endogenous markups, introducing an endogenous laborleisure choice also helps eliminate multiple steady state equilibria. Moreover, it alters the stability condition of the unique steady state as well; namely, the steady state may display damped oscillations and admit periodic orbits.

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Article provided by Society for AEF in its journal Annals of Economics and Finance.

Volume (Year): 4 (2003)
Issue (Month): 1 (May)
Pages: 177-191

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Handle: RePEc:cuf:journl:y:2003:v:4:i:1:p:177-191
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