Capital Utilization and Search Unemployment in Dynamic General Equilibrium

Ian King and Frank Stähler

No 598, Discussion Papers Series from University of Queensland, School of Economics

Abstract: We present a dynamic general equilibrium model in which both unemployment and capital utilization are determined endogenously in an environment with directed search frictions. The model allows for proportions of both labor and capital to be idle in equilibrium, where the degree of capital utilization determines its depreciation. We show that, under certain conditions, multiple steady state equilibria exist. In stable equilibria, both unemployment and capital utilization rates decline as productivity increases.

Keywords: Search unemployment; capital utilization; multiple equilibria (search for similar items in EconPapers)
JEL-codes: E24 (search for similar items in EconPapers)
Date: 2018-10-23
New Economics Papers: this item is included in nep-dge and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:598

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