A Simple Business-cycle Model with Schumpeterian Features

Luis Costa and Huw Dixon

No 2005/16, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: We develop a dynamic general equilibrium model of imperfect competition where a sunk cost of creating a new product regulates the type of entry that dominates in the economy: new products or more competition in existing industries. Considering the process of product innovation is irreversible, introduces hysteresis in the business cycle. Expansionary shocks may lead the economy to a new ‘prosperity plateau,’ but contractionary shocks only affect the market power of mature industries.

Keywords: Entry; Hysteresis; Mark-up. (search for similar items in EconPapers)
JEL-codes: E62 L13 L16 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-dge, nep-ent, nep-mac and nep-mic
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: A Simple Business-Cycle Model with Shumpeterian Features (2007)
Working Paper: A Simple Business-Cycle Model with Schumpeterian Features (2007)
Working Paper: A Simple Business-Cycle Model with Schumpeterian Features
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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp162005

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