IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Endogenous Growth Fluctuations in Unionised Economy with Productive Externalities

  • Coimbra, Rui
  • Lloyd-Braga, Teresa
  • Modesto, Leonor

We discuss the effects of unions in the labour market on steady-state multiplicity and welfare, and on the occurrence of local indeterminacy, local bifurcations and (stochastic and deterministic) endogenous fluctuations driven by self-fulfilling expectations. We consider an overlapping generations economy with capital externalities and we focus on underemployment equilibria. We find that for wide regions in the parameter space, including an arbitrarily small degree of externalities and a Cobb-Douglas technology, unions increase steady state employment and welfare, and local indeterminacy (sunspots) emerges. Our results show that the role of unions in shaping local dynamics depends on technology (externalities and factor's substitutability). Indeed, if capital externalities take intermediate values, local indeterminacy requires implausible low degrees of factor substitutability when unions are sufficiently strong. We also find that Hopf bifurcations and local deterministic endogenous fluctuations generically occur, with an elasticity of factor substitution the closest to 1 the lower the unions' bargaining power. Moreover, transcritical bifurcations generically occur for lower levels of the elasticity of factor substitution, implying the existence of two close steady states, one being a saddle and the other being indeterminate. With a CES, however, technology multiplicity of steady states is only possible in the presence of unions.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3230
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3230.

as
in new window

Length:
Date of creation: Feb 2002
Date of revision:
Handle: RePEc:cpr:ceprdp:3230
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  2. Barinci, Jean-Paul & Cheron, Arnaud, 2001. "Sunspots and the Business Cycle in a Finance Constrained Economy," Journal of Economic Theory, Elsevier, vol. 97(1), pages 30-49, March.
  3. Jean-Michel Grandmont & P, A, Pintus & R, De Vilder, 1997. "Capital-Labor Substitution and Competitive Nonlinear Endogenous Business Cycles," Working Papers 97-28, Centre de Recherche en Economie et Statistique.
  4. Caballero, R.J. & Lyons, R.K., 1991. "External Effects in U.S. Procyclical Productivity," Papers 91-19, Columbia - Graduate School of Business.
  5. Jean-Michel Grandmont, 2008. "Nonlinear Difference Equations, Bifurcations and Chaos: An Introduction," Working Papers 2008_23, Department of Economics, University of Venice "Ca' Foscari".
  6. Reichlin, Pietro, 1986. "Equilibrium cycles in an overlapping generations economy with production," Journal of Economic Theory, Elsevier, vol. 40(1), pages 89-102, October.
  7. Susanto Basu & John G. Fernald, 1995. "Are Apparent Productive Spillovers a Figment of Specification Error?," NBER Working Papers 5073, National Bureau of Economic Research, Inc.
  8. Roger E.A. Farmer & Jang Ting Guo, 1992. "Real Business Cycles and the Animal Spirits Hypothesis," UCLA Economics Working Papers 680, UCLA Department of Economics.
  9. Aloi, Marta & Dixon, Huw D. & Lloyd-Braga, Teresa, 2000. "Endogenous fluctuations in an open economy with increasing returns to scale," Journal of Economic Dynamics and Control, Elsevier, vol. 24(1), pages 97-125, January.
  10. Rodolphe Dos Santos Ferreira & Teresa Lloyd-Braga, 2002. "Can market power sustain endogenous growth in overlapping-generations economies?," Economic Theory, Springer, vol. 20(1), pages 199-205.
  11. Benhabib, J. & Farmer, R.E.A, 1991. "Indeterminacy and Increasing Returns," Papers 165, Cambridge - Risk, Information & Quantity Signals.
  12. Cazzavillan, Guido, 2001. "Indeterminacy and Endogenous Fluctuations with Arbitrarily Small Externalities," Journal of Economic Theory, Elsevier, vol. 101(1), pages 133-157, November.
  13. G, Cazzavillan & T, Lloyd-Braga & P, A, Pintus, 1997. "Multiple Steady States and Endogenous Fluctuations with Increasing Returns to Scale in Production," Working Papers 97-29, Centre de Recherche en Economie et Statistique.
  14. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  15. Burnside, Craig, 1996. "Production function regressions, returns to scale, and externalities," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 177-201, April.
  16. Sutton, John, 1986. "Non-cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 709-24, October.
  17. Larry E. Jones & Rodolfo E. Manuelli, 1990. "Finite Lifetimes and Growth," NBER Working Papers 3469, National Bureau of Economic Research, Inc.
  18. d ASPREMONT, Claude, & DOS SANTOS FERREIRA , Rodolphe & GERARD-VARET , Louis-André, 1994. "Market Power, Coordination Failures and Endogenous Fluctuations," CORE Discussion Papers 1994068, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  19. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  20. Michael B. Devereux & Ben Lockwood, 1989. "Trade Unions, Non-Binding Wage Agreements, and Capital Accumulation," Working Papers 743, Queen's University, Department of Economics.
  21. Woodford, Michael, 1986. "Stationary sunspot equilibria in a finance constrained economy," Journal of Economic Theory, Elsevier, vol. 40(1), pages 128-137, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:3230. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.