IDEAS home Printed from https://ideas.repec.org/p/ecm/nasm04/402.html
   My bibliography  Save this paper

Endogenous Business Cycles with Consumption Externalities

Author

Listed:
  • Zhi Li
  • Xiaopeng Yin,

Abstract

Empirical evidences tell us that in the recent years the expansion period is increased with reduction of the contraction period in the U.S. business cycles. Moreover, the business cycles in the United States also show the trend to be moderated with recent economic growth induced and supported by high technologies and their industries. We study endogenous business cycles by a modified synthesized endogenous business cycles model “in which expansions are neoclassical growth periods driven by productivity improvements and capital accumulation, while downturns are the results of Keynesian contractions in aggregate demand†(Francois and Lloyd-Ellis, 2002), with consumption externalities. By considering consumption externalities, the endogenized business cycles will be more likely to happen, the optimal consumption level will be higher, the technology growth rate will be bigger, the length of expansion will be longer and the length of contraction will be shorter. All of these results will lead to a faster and longer economic growth and smoother cycles. These theoretical results are significantly different from those in circumstances without the consumption externalities Francois and Lloyd-Ellis (2002) obtained, and are strongly supported by the data from the United States in the different periods.

Suggested Citation

  • Zhi Li & Xiaopeng Yin,, 2004. "Endogenous Business Cycles with Consumption Externalities," Econometric Society 2004 North American Summer Meetings 402, Econometric Society.
    • Handle: RePEc:ecm:nasm04:402
    as

    Download full text from publisher

    File URL: http://repec.org/esNASM04/up.23750.1075492438.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Abel, Andrew B, 1990. "Asset Prices under Habit Formation and Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 80(2), pages 38-42, May.
    2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    3. Francois, P. & Lloyd-Ellis, H., 2003. "Co-movement, Capital and Contracts : 'Normal' Cycles Through Creative Destruction," Discussion Paper 2003-62, Tilburg University, Center for Economic Research.
    4. Peter A. Diamond, 1973. "Consumption Externalities and Imperfect Corrective Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(2), pages 526-538, Autumn.
    5. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders and Product Cycles," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 557-586.
    6. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    7. Philippe Aghion & Peter Howitt, 1999. "On the Macroeconomic Effects of Major Technological Change," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 25, pages 15-32.
    8. Donald A. Walker (ed.), 2000. "Equilibrium," Books, Edward Elgar Publishing, volume 0, number 1585, March.
    9. Helpman, Elhanan & Trajtenberg, Manuel, 1994. "A Time to Sow and a Time to Reap: Growth Based on General Purpose Technologies," CEPR Discussion Papers 1080, C.E.P.R. Discussion Papers.
    10. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-361, May.
    11. Bresnahan, Timothy F. & Trajtenberg, M., 1995. "General purpose technologies 'Engines of growth'?," Journal of Econometrics, Elsevier, vol. 65(1), pages 83-108, January.
    12. repec:adr:anecst:y:1998:i:49-50:p:02 is not listed on IDEAS
    13. Elhanan Helpman & Manuel Trajtenberg, 1996. "Diffusion of General Purpose Technologies," NBER Working Papers 5773, National Bureau of Economic Research, Inc.
    14. Richard B. Du Boff, 1967. "The Introduction of Electric Power in American Manufacturing," Economic History Review, Economic History Society, vol. 20(3), pages 509-518, December.
    15. Bill Dupor & Wen-Fang Liu, 2003. "Jealousy and Equilibrium Overconsumption," American Economic Review, American Economic Association, vol. 93(1), pages 423-428, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Les T. Oxley & Kenneth I. Carlaw, 2004. "ICT Diffusion and Economic Growth in New Zealand," Econometric Society 2004 Australasian Meetings 167, Econometric Society.
    2. Uwe Cantner & Simone Vannuccini, 2012. "A New View of General Purpose Technologies," Jena Economics Research Papers 2012-054, Friedrich-Schiller-University Jena.
    3. Aghion, Philippe & Akcigit, Ufuk & Howitt, Peter, 2014. "What Do We Learn From Schumpeterian Growth Theory?," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 0, pages 515-563, Elsevier.
    4. Mauro Napoletano & Andrea Roventini & Sandro Sapio, 2004. "Yeast vs. Mushrooms: A Note on Harberger's "A Vision of the Growth Process"," LEM Papers Series 2004/03, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    5. Jan Youtie & Maurizio Iacopetta & Stuart Graham, 2008. "Assessing the nature of nanotechnology: can we uncover an emerging general purpose technology?," The Journal of Technology Transfer, Springer, vol. 33(3), pages 315-329, June.
    6. Chol-Won Li, 1998. "Growth, Knowledge Structure, and Qualtiy-Varierty Innovations," Working Papers 9705, Business School - Economics, University of Glasgow.
    7. Bilancini, Ennio & D'Alessandro, Simone, 2012. "Long-run welfare under externalities in consumption, leisure, and production: A case for happy degrowth vs. unhappy growth," Ecological Economics, Elsevier, vol. 84(C), pages 194-205.
    8. Oscar Afonso & Alvaro Aguiar, 2005. "North-South Diffusion of a General Purpose Technology," DEGIT Conference Papers c010_024, DEGIT, Dynamics, Economic Growth, and International Trade.
    9. Petsas Iordanis, 2015. "General Purpose Technologies and their Implications for International Trade," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 47(1), pages 7-35, September.
    10. Orlando Gomes, 2005. "Knowledge creation and technology difusion: a framework to understand economic growth," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 20(2), pages 41-61, December.
    11. Gunnarsson, Gudmundur & Mellander, Erik & Savvidou, Eleni, 2004. "Human capital is the key to the IT productivity paradox," Working Paper Series 2004:13, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    12. Peter Howitt, 2002. "The Research Agenda: Schumpeterian Growth Theory," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 3(2), April.
    13. Sang-Yong Tom Lee & Xiao Jia Guo, 2004. "Information and Communications Technology (ICT) and Spillover: A Panel Analysis," Econometric Society 2004 Far Eastern Meetings 722, Econometric Society.
    14. Antonin BERGEAUD & Gilbert Cette & Rémy Lecat, 2017. "What role did education, equipment age and technology play in 20th century productivity growth?," Rue de la Banque, Banque de France, issue 43, may..
    15. Leonardo Felli & Francois Ortalo-Magne, "undated". ""Technological Innovations: Slumps and Booms''," CARESS Working Papres 97-17, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
    16. Acemoglu, Daron & Cao, Dan, 2015. "Innovation by entrants and incumbents," Journal of Economic Theory, Elsevier, vol. 157(C), pages 255-294.
    17. Harald Edquist & Magnus Henrekson, 2006. "Technological Breakthroughs and Productivity Growth," Research in Economic History, in: Research in Economic History, pages 1-53, Emerald Group Publishing Limited.
    18. König, Tobias & Lausen, Tobias, 2016. "Relative consumption preferences and public provision of private goods," Discussion Papers, Research Unit: Market Behavior SP II 2016-213, WZB Berlin Social Science Center.
    19. Raiteri, Emilio, 2018. "A time to nourish? Evaluating the impact of public procurement on technological generality through patent data," Research Policy, Elsevier, vol. 47(5), pages 936-952.
    20. Rohini Acharya & Thomas Ziesemer, 1997. "A Closed Economy Model of Horizontal and Vertical Product Differentiation: The Case of Innovation in Biotechnology: a Correction," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 5(1), pages 91-92.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecm:nasm04:402. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F. Baum (email available below). General contact details of provider: https://edirc.repec.org/data/essssea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.