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Shirking and Capital Accumulation under Oligopolistic Competition

Zhou, Haiwen and Zhou, Ruhai (2022): Shirking and Capital Accumulation under Oligopolistic Competition.

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Abstract

In this infinite horizon model, unemployment results from the existence of efficiency wages. Consumers choose saving optimally and there is capital accumulation. Firms producing intermediate goods engage in oligopolistic competition and choose technologies to maximize profits. A more advanced technology has a higher fixed cost but a lower marginal cost of production. In the steady state, it is shown that an increase in population size or a decrease in the discount rate leads intermediate good producers to choose more advanced technologies and the wage rate increases. Interestingly, the equilibrium unemployment rate decreases with the size of the population.

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