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Endogenous Growth and Poverty Traps in a Cournotian Model

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  • Galí, Jordi
  • Zilibotti, Fabrizio

Abstract

We analyse the implications for the dynamics of capital accumulation of market power and endogenous demand elasticities, in an environment in which the latter are affected by the number of competitors in each industry. In equilibrium the interest rate increases as capital accumulates, even though the marginal product of capital is constant. Under standard assumptions both a steady-state and a balanced growth path exist, and the possibility of multiple equilibrium paths (for given initial conditions) arises. It is argued that the latter feature matches several empirical observations.

Suggested Citation

  • Galí, Jordi & Zilibotti, Fabrizio, 1994. "Endogenous Growth and Poverty Traps in a Cournotian Model," CEPR Discussion Papers 1052, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1052
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    Cited by:

    1. Monique Ebell & Christian Haefke, 2009. "Product Market Deregulation and the U.S. Employment Miracle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(3), pages 479-504, July.
    2. Benhabib, Jess & Gali, Jordi, 1995. "On growth and indeterminacy: some theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 163-211, December.
    3. Xavier Raurich-Puigdevall, 2000. "Global indeterminacy in an endogenous-growth model with public capital," Journal of Economics, Springer, vol. 71(3), pages 255-280, October.
    4. John A. List & Haiwen Zhou, 2007. "Internal Increasing Returns to Scale and Economic Growth," NBER Working Papers 12999, National Bureau of Economic Research, Inc.
    5. Fagnart, Jean-Francois & Licandro, Omar & Sneessens, Henri R., 1997. "Capacity utilization and market power," Journal of Economic Dynamics and Control, Elsevier, vol. 22(1), pages 123-140, November.
    6. Xavier Raurich, 2001. "Indeterminancy and Government Spending in a Two-Sector Model of Endogenous Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 210-229, January.
    7. Jaimovich, Nir, 2007. "Firm dynamics and markup variations: Implications for sunspot equilibria and endogenous economic fluctuations," Journal of Economic Theory, Elsevier, vol. 137(1), pages 300-325, November.
    8. Diego Comin & Mark Gertler, 2006. "Medium-Term Business Cycles," American Economic Review, American Economic Association, vol. 96(3), pages 523-551, June.
    9. Sergey Slobodyan, 1999. "Sunspot Fluctuations: A Way Out of a Development Trap?," Computing in Economics and Finance 1999 922, Society for Computational Economics.
    10. Parente, Stephen & Desmet, Klaus, 2009. "The Evolution of Markets and the Revolution of Industry: A Quantitative Model of England's Development, 1300-2000," CEPR Discussion Papers 7290, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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