Credit cycles, human capital and the distribution of income

On the significance of borders: the emergence of endogenous dynamics

“…There are also some contributions in economics that do already involve borders and not only with piecewise smooth functions, occasionally also with discontinuous specification of the central dynamic process. In business cycle theory, models in the tradition of Hicks and Kaldor with a "floor" and a "ceiling" (Hommes 1995;Sushko et al 2003Gardini et al 2006) as well as regime switching models (Tramontana et al 2010); in growth theory (Matsuyama 1999(Matsuyama , 2007Boehm and Kaas 2000;Kaas and Zink 2007;Tramontana et al 2011a), in industrial organization theory, managerial economics and competition models (Kopel 1996;Laugesen and Mosekilde 2006;Schmitt et al 2017), models of the so-called New Economic Geography and industry location (Currie and Kubin 2006;Commendatore et al 2008aCommendatore et al , b, 2020Agliari et al 2011;Schmitt et al 2018), and also in macroeconomic models with financial markets (Caballé et al 2006;Tramontana et al 2011b;Matsuyama 2013;Sushko et al 2014Kubin and Zörner 2019) borders play a crucial role. In fact, in his survey on macro-dynamics, Gomes (2006) identifies the piecewise smooth specification as one of five influential model types.…”