Sunspot Fluctuations in Two-sector Economies with Heterogeneous Agents |
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Authors: | Stefano Bosi Francesco Magris Alain Venditti |
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Institution: | (1) EPEE, Université d’Evry, Evry, France;(2) CNRS - GREQAM, 2, rue de la Charité, 13002 Marseille, France |
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Abstract: | We study a two-sector model with heterogeneous agents and borrowing constraint on labor income. We show that the relative
capital intensity difference across sectors is crucial for the conditions required to get indeterminacy and endogenous fluctuations.
The main result shows that when the consumption good is sufficiently capital intensive, local indeterminacy arises while the
elasticities of capital–labor substitution in both sectors are slightly greater than unity and the elasticity of the offer
curve is low enough. Locally indeterminate equilibria are thus compatible with a low elasticity of intertemporal substitution
in consumption and a low elasticity of the labor supply. As recently shown in empirical analysis, these conditions appear
to be in accordance with macroeconomic evidences.
We would like to thank R. Becker, J.P. Drugeon and an anonymous referee for useful comments and suggestions. The current version
also benefited from a presentation at the conference “Public Economic Theory 04”, Beijing, August 2004. |
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Keywords: | Heterogeneous agents Borrowing constraint Two-sector model Indeterminacy |
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