EconPapers    
Economics at your fingertips  
 

Testing Creative Destruction in an Opening Economy: the Case of the South African Manufacturing Industries

Philippe Aghion, Johannes Fedderke (), Peter Howitt (), Chandana Kularatne and Nicola Viegi ()

No 93, Working Papers from Economic Research Southern Africa

Abstract: We study a Lucas (1978) "fruit-tree" economy under the assumption that agents are Choquet expected utility (CEU) rather than standard expected utility (EU) decision makers. The agents’ non-additive beliefs about the economy’s stochastic dividend payment process may thus express ambiguity attitudes and accommodate violations of Savage’s sure-thing principle as elicited by Ellsberg (1961). As our main formal result we establish the existence of a unique stationary equilibrium price function for the assets in this economy. In order to account for the dynamic inconsistency of CEU decision makers, we thereby use an equilibrium concept that combines the market clearing condition of general equilibrium theory with Bayesian Nash equilibrium. A simple example about the equity premium in our economy with non-additive beliefs illustrates our formal findings.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (16) Track citations by RSS feed

Downloads: (external link)
http://www.econrsa.org/node/117 (application/pdf)

Related works:
Working Paper: Testing Creative Destruction in an Opening Economy: the Case of the South African Manufacturing Inudstries (2008) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rza:wpaper:93

Access Statistics for this paper

More papers in Working Papers from Economic Research Southern Africa Contact information at EDIRC.
Bibliographic data for series maintained by Charles Tanton ().

 
Page updated 2019-08-22
Handle: RePEc:rza:wpaper:93