Irreversibilities, uncertainty and underemployment equilibria

David de la Croix and Omar Licandro ()

Spanish Economic Review, 2000, vol. 2, issue 3, 231-248

Abstract: In a competitive overlapping generations model, technological irreversibilities and idiosyncratic uncertainty generate a misallocation of resources among segments, which takes the form of underemployment and underutilization of capacities at the aggregate level. This affects the qualitative properties of the equilibrium path. Indeed, increases in the variance of the technological shock can be responsible, a.o., for an "inescapable poverty trap," or for periodic orbits generating endogenous fluctuations in underemployment.

Keywords: Underemployment; underutilization; irreversibility; poverty trap; endogenous fluctuations (search for similar items in EconPapers)
JEL-codes: D90 (search for similar items in EconPapers)
Date: 2001-01-24
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