A Simple Business-Cycle Model with Schumpeterian Features

Luis Costa and Huw Dixon

Discussion Papers from Department of Economics, University of York

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)
New Economics Papers: this item is included in nep-com, nep-dge, nep-ent and nep-mac
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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 (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:05/30

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