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Returns to labour and chaotic cycles of wage and employment

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  • Luciano Fanti

Abstract

This paper discusses the dynamics of a standard (double Cobb-Douglas) labour market under the circumstance of changes in returns to labour. Despite the simplicity as well as the vast diffusion of this model, such an issue has so far escaped closer scrutiny by economic dynamics literature. This investigation shows: i) possible chaotic behaviours in a simple walrasian market, ii) the multiple roles that returns to labour play on the stability, and iii) the corresponding implications for stabilization policy.

Suggested Citation

  • Luciano Fanti, 2012. "Returns to labour and chaotic cycles of wage and employment," Discussion Papers 2012/150, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  • Handle: RePEc:pie:dsedps:2012/150
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    File URL: http://www.ec.unipi.it/documents/Ricerca/papers/2012-150.pdf
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    References listed on IDEAS

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    1. Mantel, Rolf R., 1974. "On the characterization of aggregate excess demand," Journal of Economic Theory, Elsevier, vol. 7(3), pages 348-353, March.
    2. Chiarella, Carl, 1988. "The cobweb model: Its instability and the onset of chaos," Economic Modelling, Elsevier, vol. 5(4), pages 377-384, October.
    3. Debreu, Gerard, 1974. "Excess demand functions," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 15-21, March.
    4. Hommes, Cars H., 1994. "Dynamics of the cobweb model with adaptive expectations and nonlinear supply and demand," Journal of Economic Behavior & Organization, Elsevier, vol. 24(3), pages 315-335, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    chaos; walrasian labour market; returns to labor.;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J0 - Labor and Demographic Economics - - General

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