Indeterminacy, maintenance expenditures and capital-labour substitution elasticity
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Recent research in macroeconomics has focused on the possibility ofindeterminacy since a model with indeterminacy can generatebusiness cycles that are driven by sunspots. However, most ofexisting works in this area build on the Cobb-Douglas productionfunction, which seems not empirically plausible. This paper departsfrom unitary values for the elasticity of capital-labour substitution inproduction and investigates the role of capital-labour substitutionelasticity on the occurrence of indeterminacy. I show that in atwo-sector model with maintenance expenditures, the minimumdegree of externalities required for indeterminacy is much lower thanits one-sector predecessor. Moreover, results show that indeterminacymay still occur when the elasticity of labour supply is within therange of empirical plausibility.
Abstract
Recent research in macroeconomics has focused on the possibility ofindeterminacy since a model with indeterminacy can generatebusiness cycles that are driven by sunspots. However, most ofexisting works in this area build on the Cobb-Douglas productionfunction, which seems not empirically plausible. This paper departsfrom unitary values for the elasticity of capital-labour substitution inproduction and investigates the role of capital-labour substitutionelasticity on the occurrence of indeterminacy. I show that in atwo-sector model with maintenance expenditures, the minimumdegree of externalities required for indeterminacy is much lower thanits one-sector predecessor. Moreover, results show that indeterminacymay still occur when the elasticity of labour supply is within therange of empirical plausibility.
참고문헌 (25)
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