Too much of a good thing: endogenous business cycles generated by bounded technological progress

Gomes, Orlando (2006): Too much of a good thing: endogenous business cycles generated by bounded technological progress.

Abstract

Following Jones and Williams (2000), we assume that R&D is simultaneously subject to positive and to negative external effects (e.g., the non rival nature of technology conflicts with congestion externalities). This observation allows to conceive an economy where two R&D sectors evolve without departing significantly from each other in terms of their productive results (society tends to penalize imbalances in technical progress, making negative external effects to appear associated to a sector when this outstands relatively to the other sector; the second sector, in turn, will be subject to positive externalities that reflect a catching up effect). The proposed framework, when associated to a growth setup, is able to replicate the existence of endogenous fluctuations and, therefore, it intends to be a contribution to the literature on endogenous business cycles.

• Item Type: MPRA Paper
• Institution: Escola Superior de Comunicação Social - Instituto Politécnico de Lisboa
• Language: English
• Keywords: Technology; Externalities; Endogenous business cycles; Growth models; Nonlinear dynamics and chaos
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles

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