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Endogenous Skill Cycles

  • Francesco Busato
  • Enrico Marchetti

This paper explores the ability of a class of one-sector models to generate endogenous skills cycles. Skills cycles are here defined as endogenous fluctuations of the composition of equilibrium allocation of labor services. We consider a one sector economy in which there exist one type of capital stock, and a finite number of different labor services, which are assumed to be heterogeneous along the skill/productivity dimension. We apply the Hopf bifurcation theorem and provide necessary conditions on the model's parameters for having a closed orbit as the economy's stable set. We also develop a numerical example (based on the United States economy) showing how this closed orbit can appear under reasonable parameter values.

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Paper provided by University of Rome La Sapienza, Department of Public Economics in its series Working Papers with number 127.

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Length: 21
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:sap:wpaper:wp127
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