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

  • Hippolyte D'Albis


    (LERNA - Economie des Ressources Naturelles - Institut national de la recherche agronomique (INRA) - CEA - UT1 - Université Toulouse 1 Capitole)

  • 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 - AMU - Aix-Marseille Université)

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 [5], to be a good index of experience. We prove that a slight memory effect characterizing the learning-by-doing process is enough to generate business cycle fluctuations through a Hopf bifurcation. This is obtained for reasonable parameter values, notably for both the elasticity of output with respect to the externality 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 Working Papers with number halshs-00432267.

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Date of creation: 15 Nov 2009
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Handle: RePEc:hal:wpaper:halshs-00432267
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  21. Hippolyte D'Albis & Cuong Le Van, 2006. "Existence of a competitive equilibrium in the Lucas (1988) model without physical capital," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00101208, HAL.
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