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Business Cycle Fluctuations and Learning-by-doing Externalities in a One-sector Model

Hippolyte d'Albis (), Emmanuelle Augeraud-Véron () and Alain Venditti ()

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We consider a one-sector Ramsey-type growth model with inelastic labor and learning-by-doing externalities based on cumulative gross investment (cumulative production of capital goods), which is assumed, in accordance with Arrow (1962), to be a better index of experience than the average capital stock. We prove that a slight memory effect characterizing the learning-by-doing process is enough to generate business cycle fluctuations through a Hopf bifurcation leading to stable periodic orbits. This is obtained for reasonable parameter values, notably for both the amount of externalities and the elasticity of intertemporal substitution. Hence, contrary to all the results available in the literature on aggregate models, we show that endogenous fluctuations are compatible with a low (in actual fact, zero) wage elasticity of the labor supply.

Keywords: Local determinacy; One-sector infinite-horizon model; Learning-by-doing externalities; Inelastic labor; Business cycle fluctuations; Hopf bifurcation (search for similar items in EconPapers)
Date: 2012-10
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00759198
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Published in Journal of Mathematical Economics, Elsevier, 2012, 48 (5), pp.295-308. 〈10.1016/j.jmateco.2012.07.002〉

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Journal Article: Business cycle fluctuations and learning-by-doing externalities in a one-sector model (2012) Downloads
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Working Paper: Business cycle fluctuations and learning-by-doing externalities in a one-sector model (2012) Downloads
Working Paper: Business cycle fluctuations and learning-by-doing externalities in a one-sector model (2010) Downloads
Working Paper: Business cycle fluctuations and learning-by-doing externalities in a one-sector model (2009) Downloads
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