Business cycle fluctuations and learning-by-doing externalities in a one-sector model

Abstract

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 [4], 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.

Fifty years of mathematical growth theory: Classical topics and new trends

“…By making these editorial choices (which are essentially motivated by the time span of this survey), we have necessarily minimized the space that other recently active publication areas would have deserved. 4 Also to minimize space devoted to technicalities, we will stick to discrete time modelling, which covers a large majority of economic growth articles published in theory journals. We only use continuous time/age/space modelling in the last section devoted to infinite-dimensional growth models (by construction).…”

Sunspot fluctuations in two‐sector models: New results with additively separable preferences

“…Despite these tradeoffs in the relative intensities of these economic mechanisms, a standard conclusion from one‐sector models is that endogenous fluctuations hardly occurs for empirically plausible calibrations of the parameters unless other features such as a variable capital utilization rate (Wen, ; Benhabib and Wen ) or externalities based on Arrow () type cumulative gross investment (d'Albis et al . ) 2 are introduced.…”

“…Moreover, local indeterminacy never arises and endogenous fluctuations are obtained through periodic orbits (see d'Albis et al . ).…”

On the Infinite-Dimensional Representation of Stochastic Controlled Systems with Delayed Control in the Diffusion Term

“…We may quote, among others: the problem of growth models with time-to-build in production (see [1,2,4]) or investment (see [19,22]) or with delays in the learning-by-doing process (see [7]); vintage capital models (see [6,16]); advertising models (see [15,17,20,21]). …”