Gomes, Orlando (2006): Can social interaction contribute to explain business cycles?
Download (192Kb) | Preview
Recent literature has been able to include into standard optimal growth models some hypotheses that allow for the generation of endogenous long run fluctuations. This paper contributes to this endogenous business cycles literature by considering social interactions. In the proposed model, individuals can choose, under a discrete choice rule, to which social group they prefer to belong to. This selection process is constrained essentially by the dimension of the group, which is the main determinant regarding the utility individuals withdraw from social interaction. The proposed setup implies the presence of cycles and chaotic motion describing the evolution of group dimension over time. Because being member of a group involves costs to households, the inclusion of these costs in a standard Ramsey growth model will imply that endogenous cycles might arise in the time trajectory of the growth rate of output.
|Item Type:||MPRA Paper|
|Institution:||Escola Superior de Comunicação Social - Instituto Politécnico de Lisboa|
|Original Title:||Can social interaction contribute to explain business cycles?|
|Keywords:||Social interaction; Business cycles; Growth models; Nonlinear dynamics and Chaos; Discrete choice|
|Subjects:||C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C61 - Optimization Techniques; Programming Models; Dynamic Analysis
Z - Other Special Topics > Z1 - Cultural Economics; Economic Sociology; Economic Anthropology > Z13 - Economic Sociology; Economic Anthropology; Social and Economic Stratification
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
|Depositing User:||Orlando Gomes|
|Date Deposited:||20. Apr 2007|
|Last Modified:||12. Feb 2013 17:54|
Anderson, S.; A. de Palma and J. Thisse (1993). Discrete Choice Theory of Product Differentiation. Cambridge, Mass.: MIT Press. Benabou, R. (1993). “Workings of a City: Location, Education and Production.” Quarterly Journal of Economics, vol. 108, pp. 619-652. Benhabib, J. and R. H. Day (1981). “Rational Choice and Erratic Behaviour.” Review of Economic Studies, vol. 48, pp. 459-471. Bisin, A.; U. Horst and O. Ozgur (2006). “Rational Expectations Equilibria of Economies with Local Interactions.” Journal of Economic Theory, vol. 127, pp. 74-116. Blume, L. and S. Durlauf (2001). “The Interactions-based Approach to Socioeconomic Behaviour.” in S. Durlauf, P. Young (eds), Social Dynamics, Cambridge, MA: Brookings Institution Press and MIT Press. Brock, W. A. and S. Durlauf (2001a). “Discrete Choice with Social Interactions.” Review of Economic Studies, vol. 68, pp. 235-260. Brock, W. A. and S. Durlauf (2001b). “Interactions-based Models.“ in J. Heckman, E. Leamer (eds.), Handbook of Econometrics, vol. V, Amsterdam: North-Holland. Brock, W. A. and C. H. Hommes (1998). “Heterogeneous Beliefs and Routes to Chaos in a Simple Asset Pricing Model.” Journal of Economic Dynamics and Control, vol. 22, pp. 1235-1274. Castaldi, C. and F. Alkemade (2004). “An Agent-Based Model of Directed Advertising on a Social Network.” Computing in Economics and Finance, nº 221. Cellarier, L. (2006). “Constant Gain Learning and Business Cycles.” Journal of Macroeconomics, vol. 28, pp. 51-85. Christiano, L. and S. Harrison (1999). “Chaos, Sunspots and Automatic Stabilizers.” Journal of Monetary Economics, vol. 44, pp. 3-31. Coury, T. and Y. Wen (2005). “Global Indeterminacy and Chaos in Standard RBC Models.” University of Oxford and Cornell University working paper. Crowe, C. (2004). “Inflation, Inequality and Social Conflict.” CEP discussion paper nº 0657. Day, R. H. (1982). “Irregular Growth Cycles.” American Economic Review, vol. 72, pp.406-414. Durlauf, S. (1993). “Nonergodic Economic Growth.” Review of Economic Studies, vol. 60, pp. 349-366. Durlauf, S. (1996). “Neighborhood Feedbacks, Endogenous Stratification and Income Inequality.” in W. Barnett, G. Gandolfo, C. Hillinger (eds.), Dynamic Desiquilibrium Modelling: Proceedings of the 9th InternationalSymposium on Economic Theory and Econometrics, New York: Cambridge University Press. Ellison, G. and D. Fudenberg (1993). “Rules of Thumb for Social Learning.” Journal of Political Economy, vol. 101, pp. 612-644. Entorf, H. and M. Lauk (2006). “Peer Effects, Social Multipliers and Migrants at School: an International Comparison.” IZA discussion paper nº 2182. Glaeser, E.; B. Sacerdote and J. Scheinkman (1996). “Crime and Social Interactions.“ Quarterly Journal of Economics, vol. 111, pp. 507-548. Glaeser, E. and J. Scheinkman (1999). “Measuring Social Interactions.“ in S. Durlauf, P. Young (eds), Social Dynamics, Cambridge, MA: Brookings Institution Press and MIT Press. Gomes, O. (2005). “Volatility, Heterogeneous Agents and Chaos.” The Electronic Journal of Evolutionary Modelling and Economic Dynamics, nº 1047, pp. 1-32, http://www.e-jemed.org/1047/index.php Gomes, O. (2006a). “Local Bifurcations and Global Dynamics in a Solow-type Endogenous Business Cycles Model.”, Annals of Economics and Finance, vol. 7, pp. 91-127. Gomes, O. (2006b) “Too Much of a Good Thing: Endogenous Business Cycles generated by Bounded Technological Progress.” ESCS-UNIDE Working paper. Grandmont, J. M. (1985). “On Endogenous Competitive Business Cycles.” Econometrica, vol. 53, pp. 995-1045. Guo, J. T. and K. J. Lansing (2002). “Fiscal Policy, Increasing Returns and Endogenous Fluctuations.” Macroeconomic Dynamics, vol. 6, pp. 633-664. Hong, H.; J. D. Kubik and J. C. Stein (2004). “Social Interaction and Stock Market Participation.“ Journal of Finance, vol. 59, pp. 137-163. Ioannides, Y. (2006). “Topologies of Social Interactions.” Economic Theory, vol. 28, pp. 559-584. Kelly, M. (1997). “The Dynamics of Smithian Growth.” Quarterly Journal of Economics, vol. 112, pp. 939-964. Kooreman, P. and A. Soetevent (2002). “A Discrete Choice Model with Social Interactions: an Analysis of School Teen Behavior.” University of Groningen CCSO working paper nº 200214. Krauth, B. V. (2000). “Social Interactions, Thresholds and Unemplyment in Neighborhoods.” SFU working paper 00-12. Manski, C. and D. McFadden (1981). Structural Analysis of Discrete Data with Econometric Applications. Cambridge, Mass.: MIT Press. Schelling, T. (1972). “A Process of Residential Segregation: Neighborhood Tipping.” in A. Pascal (ed.), Racial Discrimination and Economic Life, Lexington, MA: Lexington Books. Schmitt-Grohé, S. (2000). “Endogenous Business Cycles and the Dynamics of Output, Hours, and Consumption.” American Economic Review, vol. 90, pp. 1136-1159. Stutzer, M. J. (1980). “Chaotic Dynamics and Bifurcations in a Macro-Model.” Journal of Economic Dynamics and Control, vol. 2, pp. 353-376. Topa, G. (2001). “Social Interactions, Local Spillover and Unemployment.” Review of Economic Studies, vol. 68, pp. 261-295.