Gomes, Orlando (2006): Too much of a good thing: endogenous business cycles generated by bounded technological progress.
Download (235kB) | Preview
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|
|Original Title:||Too much of a good thing: endogenous business cycles generated by bounded technological progress|
|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
|Depositing User:||Orlando Gomes|
|Date Deposited:||20. Apr 2007|
|Last Modified:||19. Feb 2013 23:06|
Baumol, W. J. and J. Benhabib (1989). “Chaos: Significance, Mechanism, and Economic Applications.” Journal of Economic Perspectives, vol. 3, pp. 77-107. Benhabib, J. and R. H. Day (1981). “Rational Choice and Erratic Behaviour.” Review of Economic Studies, vol. 48, pp. 459-471. Boldrin, M.; K. Nishimura; T. Shigoka and M. Yano (2001). “Chaotic Equilibrium Dynamics in Endogenous Growth Models.” Journal of Economic Theory, vol. 96, pp. 97-132. Boldrin, M. and M. Woodford (1990). “Equilibrium Models Displaying Endogenous Fluctuations and Chaos: a Survey.” Journal of Monetary Economics, vol. 25, pp. 189-223. Bresnahan, T. F.; E. Brynjolfsson and L. M. Hitt (2002). “Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence.” Quarterly Journal of Economics, vol. 117, pp. 339-376. Brynjolfsson, E. (1993). “Information Technology and the Productivity Paradox: Review and Assessment.” Communications of the ACM, vol. 35, pp. 66-77. Bullard, J. B. and A. Butler (1993). “Nonlinearity and Chaos in Economic Models: Implications for Policy Decisions.” Economic Journal, vol. 103, pp. 849-867. Cellarier, L. (2006). “Constant Gain Learning and Business Cycles.” Journal of Macroeconomics, vol. 28, pp. 51-85. Chiarella, C. (1992). “Developments in Nonlinear Economic Dynamics: Past, Present and Future.” University of Technology Sydney, School of Finance and Economics working paper nº 14. Christiano, L. and S. Harrison (1999). “Chaos, Sunspots and Automatic Stabilizers.” Journal of Monetary Economics, vol. 44, pp. 3-31. Day, R. H. (1982). “Irregular Growth Cycles.” American Economic Review, vol. 72, pp.406-414. Goenka, A. and O. Poulsen (2004). “Factor Intensity Reversal and Ergodic Chaos.” Working paper 04-13, Aarhus School of Business, Department of Economics. 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). “Routes to Chaos in Macroeconomic Theory.” Journal of Economic Studies, forthcoming. Grandmont, J. M. (1985). “On Endogenous Competitive Business Cycles.” Econometrica, vol. 53, pp. 995-1045. Gunnarsson, G.; E. Mellander e E. Savvidou (2004). “Human Capital is the Key to the IT Productivity Paradox.” Institute for Labour Market Policy Evaluation working paper 2004:13. Guo, J. T. and K. J. Lansing (2002). “Fiscal Policy, Increasing Returns and Endogenous Fluctuations.” Macroeconomic Dynamics, vol. 6, pp. 633-664. Jones, C. I. (1995). “R&D-Based Models of Economic Growth.” Journal of Political Economy, vol. 103, pp. 759-784. Jones, C. I. and J. Williams (2000). “Too Much of a Good Thing? The Economics of Investment in R&D.” Journal of Economic Growth, vol. 5, nº 1, pp. 65-85. Li, T. and J. Yorke (1975). “Period Three Implies Chaos.” American Mathematical Monthly, vol. 82, pp. 985-992. Medio, A. and M. Lines (2001). Nonlinear Dynamics: a Primer. Cambridge, UK: Cambridge University Press. Mitra, T.; K. Nishimura and G. Sorger (2005). “Optimal Cycles and Chaos.” Cornell University, Kyoto University and University of Vienna working paper. Nishimura, K. and M. Yano (1995). “Nonlinear Dynamics and Chaos in Optimal Growth: an Example.” Econometrica, vol. 63, pp. 981-1001. Romer, P. M. (1990). “Endogenous Technological Change.” Journal of Political Economy, vol. 98, pp. S71-S102. Schmitt-Grohé, S. (2000). “Endogenous Business Cycles and the Dynamics of Output, Hours, and Consumption.” American Economic Review, vol. 90, pp. 1136-1159. Sengupta, A. (2003). “Toward a Theory of Chaos.” International Journal of Bifurcation and Chaos, vol. 13, pp. 3147-3233. Solow, R. M. (1987). “We’d Better Watch Out.” New York Times Book Review, July 12, p. 36. Stutzer, M. J. (1980). “Chaotic Dynamics and Bifurcations in a Macro-Model.” Journal of Economic Dynamics and Control, vol. 2, pp. 353-376.