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Business cycle fluctuations and learning-by-doing externalities in a one-sector model

  • Hippolyte D'Albis

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)

  • Emmanuelle Augeraud-Véron

    ()

    (MIA - Mathématiques, Image et Applications - Université de La Rochelle)

  • Alain Venditti

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université Paul Cézanne - Aix-Marseille 3 - Université de la Méditerranée - Aix-Marseille 2 - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - AMU - Aix-Marseille Université, EDHEC Business School - Département Comptabilité, Droit, Finance et Economie)

We consider a one-sector Ramsey-type growth model with inelastic labor and learning-by-doing externalities based on cumulative gross investment (cumulative production of capital goods), which is assumed, in accordance with Arrow [4], to be a better index of experience than the average capital stock. We prove that a slight memory effect characterizing the learning-by-doing process is enough to generate business cycle fluctuations through a Hopf bifurcation leading to stable periodic orbits. This is obtained for reasonable parameter values, notably for both the amount of externalities and the elasticity of intertemporal substitution. Hence, contrary to all the results available in the literature on aggregate models, we show that endogenous fluctuations are compatible with a low (in actual fact, zero) wage elasticity of the labor supply.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00717198.

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Date of creation: Mar 2012
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Publication status: Published in Documents de travail du Centre d'Economie de la Sorbonne 2012.26 - ISSN : 1955-611X. 2012
Handle: RePEc:hal:cesptp:halshs-00717198
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00717198
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