Chaos, sunspots and automatic stabilizers

Abstract

We study a one-sector growth model which is standard except for the presence of an externalityin the productionfunction. The set of competitive equilibriais large. It includes constant equilibria, sunspot equilibria, cyclical and chaotic equilibria, and equilibria with deterministic or stochasticregime switching. The efficient allocation is characterizedby constant employment and a constant growth rate. We identify an income tax-subsidy schedule that supports the efficient allocation as the unique equilibriumoutcome. That schedule has two properties: (i) it specifies the tax rateto be an increasingfunction of aggregateemployment,and (ii) earningsaresubsidized when aggregate employment is at its efficient level. The first featureeliminates inefficient, fluctuating equilibria, while the second induces agentsto internalizethe externality.

Capacity Utilization under Increasing Returns to Scale

“…Moreover, demand-side shocks are found to be far more important than supply-side shocks in explaining U.S. business cycles under the current specification of the model. 24 which does not change the determinate and the trace of the Jacobian of the system (c). It is easy to show that the Jacobian is …”

“…The RMSAE 27 CAPACITY UTILIZATION 18 The spectra of the model's growth rates were obtained by taking the first difference of Eq. (24). To compute the spectra of the data, a VAR was estimated with four lags included for output, consumption, investment, and employment.…”

Decentralized Allocation of Human Capital and Nonlinear Growth

“…Therefore, the model can be thought alongside with the recent literature on endogenous business cycles [see Christiano and Harrison (1999), Schmitt-Grohé (2000), Guo andLansing (2002), Cellarier (2006), Dosi, Fagiolo and Roventini (2006), Gomes (2006bGomes ( , 2006c, Lloyd-Braga, Nourry and Venditti (2006), among many others].…”

Tariff and Equilibrium Indeterminacy: A Global Analysis

“…2 For example, Christiano and Harrison (1999) analyzed this kind of regime switching sunspot equilibria in a onesector economy with productive externalities. And Stockman (2009) explores it in a one-sector economy with …scal increasing returns.…”

“…Using the same de…nitions of admissible trajectories and weak maximality as in Stockman (2009), we have su¢ cient conditions for the weakly optimal solution of 5 our problem. 4 Proposition 1. Assume that prices fw t ; r t g, tari¤s f t g and initial capital stock k 0 are given.…”