Indeterminacy and Increasing Returns

Benhabib, Jess; Farmer, Roger E. A.

doi:10.1006/jeth.1994.1031

Cited by 824 publications

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“…The viewpoint of increasing costs in adjusting the utilization margin is particularly stressed by Shapiro [46,47]. If % 1, the optimal rate of capacity utilization is always one (100 0) and the model is reduced to that of Baxter and King [9] and Benhabib and Farmer [11].…”

Section: The Modelmentioning

confidence: 99%

“…Theoretical literature has shown that with sufficiently large returns-toscale, an otherwise standard Real Business Cycle (RBC) model can exhibit multiple convergence paths toward a steady state (e.g., Benhabib and Farmer [11]). 2 This type of model can better explain the cyclical properties of the U.S. time series than the standard RBC model type, which assumes constant returns-to-scale production technologies (e.g., see Farmer and Guo [28]).…”

Section: Introductionmentioning

confidence: 99%

“…2 This type of model can better explain the cyclical properties of the U.S. time series than the standard RBC model type, which assumes constant returns-to-scale production technologies (e.g., see Farmer and Guo [28]). However, in order to generate multiple equilibria in a onesector RBC model, the degree of increasing returns-to-scale must be large enough to imply that the aggregate labor demand curve should be upwardsloping and steeper than the labor supply curve (Benhabib and Farmer [11], and Schmitt-Grohe [45]). These implications are inconsistent with empirical estimates on returns-to-scale.…”

Section: Introductionmentioning

confidence: 99%

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Capacity Utilization under Increasing Returns to Scale

Wen

1998

Journal of Economic Theory

234

257

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Section: The Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Capacity Utilization under Increasing Returns to Scale

Wen

1998

Journal of Economic Theory

234

257

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“…Still we need to calibrate B, ψ, δ and ρ. The rate of time preferences can be set as 0.065 (see Benhabib and Perli (1994) and Benhabib and Farmer (1994)) and the depreciation of physical capital lies in the range 0.06-0.1 (see King and Rebelo (1999) and Stokey and Rebelo (1995)). We set δ = 0.06.…”

Section: Calibration and Numerical Analysis Of The Equilibriummentioning

confidence: 99%

Skill-Biased Technological Change and Endogenous Labor Supply in EU Transition Economies and the US

Cazzavillan

Olszewski

2009

SSRN Journal

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In this paper skill-biased technological change is linked with endogenous labor supply which allows for unemployment. This is a novel approach, as the literature on skill-biased technological change considers inelastic labor supply. Elastic labor supply allows us to explain how the observed increasing unemployment of unskilled workers is caused by skill-biased technological change. Our numerical analysis shows that if the skill-biased technological change is not followed by the growth of total factor productivity, then output, physical capital stock and consumption decline. Using empirical data on wages and education, we construct a time series for skill-biased technological change for Poland and the US. The empirical relevance of the model is tested by calibrating it to empirical data for Poland over the period 1996 and US over the period 1992. With only two necessary inputs, share of skilled workers in total population and the technology adopted by firms, this model allows to simulate the future behaviour of the labor market.

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“…This literature started with Azariadis(1981) and was further extended by Farmer and others (see Farmer and Guo(1994), Benhabib and Farmer(1994). These authors aim at developing rigorous models of the business cycle in which expectations are rational and aggregate fluctuations are driven by animal spirits.…”

Section: Introductionmentioning

confidence: 99%

Animal spirits and monetary policy

Grauwe

2010

Econ Theory

232

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We develop a behavioral macroeconomic model in which agents use simple but biased rules to forecast future output and inflation. This model generates endogenous waves of optimism and pessimism ("Animal Spirits") that are generated by the correlation of biased beliefs. We contrast the dynamics of this model with a stylized DSGE-version of the model and we study the implications for monetary policies. One of our main results is that strict inflation targeting is suboptimal because it gives more scope for waves of optimism and pessimism to emerge thereby destabilizing output and inflation. Terms of use: Documents in EconStor mayJEL Code: E10, E32, D83.

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Indeterminacy and Increasing Returns

Cited by 824 publications

References 0 publications

Capacity Utilization under Increasing Returns to Scale

Capacity Utilization under Increasing Returns to Scale

Skill-Biased Technological Change and Endogenous Labor Supply in EU Transition Economies and the US

Animal spirits and monetary policy

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