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A Simple Business-cycle Model with Schumpeterian Features

Luis Costa and Huw Dixon

No 2005/16, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

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)
Date: 2005
New Economics Papers: this item is included in nep-dge, nep-ent, nep-mac and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: A Simple Business-Cycle Model with Shumpeterian Features (2007) Downloads
Working Paper: A Simple Business-Cycle Model with Schumpeterian Features (2007) Downloads
Working Paper: A Simple Business-Cycle Model with Schumpeterian Features Downloads
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More papers in Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa Department of Economics, ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL.
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