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Irreversibility, Uncertainty and Underemployment Equilibria

Author

Listed:
  • de la Croix, David

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

  • Licandro, Omar

    (FEDEA, Madrid; University Carlos III, Madrid)

Abstract

In a competitive overlapping generation model, underutilization of labor and equipment can be due to the combinaison of irreversibility of human capital, physical capital and technology with idiosyncratic productivity shocks. Irreversibilities and uncertainty generate an inefficient allocation of resources among sectors, which takes the form of underemployment and underutilization of capacities at the aggregate level and affects the equilibrium path of capital. We provide examples in which this missallocation, called structural "mismatch", can be responsible, a.o., for an "inescapable poverty trap", or for periodic orbits generating endogenous fluctuations in underemployment.

Suggested Citation

  • de la Croix, David & Licandro, Omar, 1993. "Irreversibility, Uncertainty and Underemployment Equilibria," LIDAM Discussion Papers IRES 1994028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Oct 1994.
    • Handle: RePEc:ctl:louvir:1994028
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    Cited by:

    1. Boretta, M & Cantù, L & Corti, M & del Favero, E, 1997. "Cubic phases of gangliosides in water: Possible role of the conformational bistability of the headgroup," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 236(1), pages 162-176.
    2. Fagnart, Jean-Francois & Licandro, Omar & Sneessens, Henri, 1995. "Capacity utilization dynamics and market power," UC3M Working papers. Economics 3906, Universidad Carlos III de Madrid. Departamento de Economía.
    3. Anna Pestova, 2015. "Leading Indicators of the Business Cycle: Dynamic Logit Models for OECD Countries and Russia," HSE Working papers WP BRP 94/EC/2015, National Research University Higher School of Economics.
    4. 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.

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    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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