On the Stabilizing Virtues of Imperfect Competition
We analyze the stabilizing role of imperfect competition on fluctuations due to indeterminacy and endogenous cycles. In this paper, imperfect competition is a source of monopoly profits, because of producer market power. Considering anoverlapping generations model with capital accumulation and elastic labor supply, we show that under imperfect competition, the emergence of endogenous fluctuations requires a weaker substitution between production factorsthan under perfect competition. In this sense, imperfect competition stabilizes fluctuations. However, we find an opposite conclusion concerning the elasticity of labor supply. Indeed, endogenous fluctuations are compatible with a less elastic labor supply under imperfect competition.
|Date of creation:||2005|
|Date of revision:|
|Publication status:||Published in International Journal of Economic Theory, Wiley, 2005, 1 (4), pp.313-323. <10.1111/j.1742-7363.2005.00019.x>|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00194173|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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.:
- Duffy, John & Papageorgiou, Chris, 2000. "A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
- GRANDMONT, Jean-Michel & PINTUS, Patrick & de VILDER, Robin, 1997.
"Capital-labor substitution and competitive nonlinear endogenous business cycles,"
CORE Discussion Papers
1997087, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Grandmont, Jean-Michel & Pintus, Patrick & de Vilder, Robin, 1998. "Capital-Labor Substitution and Competitive Nonlinear Endogenous Business Cycles," Journal of Economic Theory, Elsevier, vol. 80(1), pages 14-59, May.
- 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.
- Jorgen Jacobsen, Hans, 2000. "Endogenous, imperfectly competitive business cycles," European Economic Review, Elsevier, vol. 44(2), pages 305-336, February.
- Thomas Seegmuller, 2005. "Steady state analysis and endogenous fluctuations in a finance constrained model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00194358, HAL.
- Benhabib, Jess & Farmer, Roger E.A., 1991.
"Indeterminacy and Increasing Returns,"
91-59, C.V. Starr Center for Applied Economics, New York University.
- Gali, J., 1991.
"Monopolistic Competition, Business Cycles and the Composition of Aggregate Demand,"
92-03, Columbia - Graduate School of Business.
- Gali Jordi, 1994. "Monopolistic Competition, Business Cycles, and the Composition of Aggregate Demand," Journal of Economic Theory, Elsevier, vol. 63(1), pages 73-96, June.
- Jordi Galí, 1993. "Monopolistic competition, business cycles and the composition of aggregate demand," Economics Working Papers 45, Department of Economics and Business, Universitat Pompeu Fabra.
- Benhabib, Jess & Farmer, Roger E.A., 1999. "Indeterminacy and sunspots in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 6, pages 387-448 Elsevier.
- Cazzavillan, Guido & Lloyd-Braga, Teresa & Pintus, Patrick, 1996.
"Multiple steady states and endogenous fluctuations with increasing returns to scale in production,"
CEPREMAP Working Papers (Couverture Orange)
- Cazzavillan, Guido & Lloyd-Braga, Teresa & Pintus, Patrick A., 1998. "Multiple Steady States and Endogenous Fluctuations with Increasing Returns to Scale in Production," Journal of Economic Theory, Elsevier, vol. 80(1), pages 60-107, May.
- 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.
- Silvestre, J., 1994. "Market Power in Macroeconomic Models: New Developments," Papers 94-07, California Davis - Institute of Governmental Affairs.
- Weder, Mark, 1997.
"Animal spirits, technology shocks and the business cycle,"
SFB 373 Discussion Papers
1997,61, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Weder, Mark, 2000. "Animal spirits, technology shocks and the business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 24(2), pages 273-295, February.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977.
"Monopolistic Competition and Optimum Product Diversity,"
American Economic Review,
American Economic Association, vol. 67(3), pages 297-308, June.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
- Guo, Jang-Ting & Harrison, Sharon G., 2004. "Balanced-budget rules and macroeconomic (in)stability," Journal of Economic Theory, Elsevier, vol. 119(2), pages 357-363, December.
- Reichlin, Pietro, 1986. "Equilibrium cycles in an overlapping generations economy with production," Journal of Economic Theory, Elsevier, vol. 40(1), pages 89-102, October.
- Grandmont, Jean-Michel, 1985.
"On Endogenous Competitive Business Cycles,"
Econometric Society, vol. 53(5), pages 995-1045, September.
- Rodolphe Dos Santos Ferreira & Teresa Lloyd-Braga, 2002. "Can market power sustain endogenous growth in overlapping-generations economies?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 20(1), pages 199-205.
- Thomas Seegmuller, 2005. "Steady state analysis and endogenous fluctuations in a finance constrained model," Cahiers de la Maison des Sciences Economiques v05029, Université Panthéon-Sorbonne (Paris 1).
When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:halshs-00194173. 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: (CCSD)
If references are entirely missing, you can add them using this form.