CAN CONSUMPTION SPILLOVERS BE A SOURCE OF EQUILIBRIUM INDETERMINACY?

Jaime Alonso-Carrera (), Jordi caballe () and Xavier Raurich ()

CAMA Working Papers from Australian National University, Centre for Applied Macroeconomic Analysis

Abstract: In this paper, we show that consumption externalities are a source of equilibrium indeterminacy in a growth model with endogenous labor supply. In particular, when the marginal rate of substitution between own consumption and the others’ consumption is constant along the equilibrium path, the equilibrium does not exhibit indeterminacy. In contrast, when that marginal rate of substitution is not constant, the equilibrium may exhibit indeterminacy even if the elasticity of the labor demand is smaller than the elasticity of the Frisch labor supply.

JEL-codes: D91 E62 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: Written 2007-07
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Related works:
Working Paper: Can consumption spillovers be a source of equilibrium indeterminacy? (2005)
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