Multiple equilibria in a growth model with monopolistic competition (*)

Jordi Galí

Economic Theory, 1996, vol. 8, issue 2, 266 pages

Abstract: The standard neoclassical growth model is modified by introducing a market structure characterized by monopolistic competition and variable demand elasticities. In equilibrium, the price elasticity of the demand schedule facing a typical firm is a function of the aggregate savings rate. The latter feature results from an assumed wedge between the elasticity of substitution across goods in productive activities and that in consumption. In contrast with most examples in the literature our model does not require increasing returns (internal or external) in order to generate multiple equilibria.

Date: 1996
Note: Received: April 25, 1994; Accepted: April 25, 1995
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Journal Article: Multiple Equilibria in a Growth Model with Monopolistic Competition (1996)
Working Paper: Multiple Equilibria in a Growth Model with Monopolistic Competition (1993)
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