Endogenous skill cycles |
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Authors: | Francesco Busato Enrico Marchetti |
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Affiliation: | 1. University of Naples Parthenope, Naples, Italy;2. School of Economics and Management, University of Aarhus, DK-8000, Aarhus C., Denmark;3. Department of Economic Studies “S. Vinci”, University of Naples Parthenope, Via Medina, 40, 80133 Naples, Italy;4. Department of Public Economics, Sapienza University of Rome, IT 00161, Rome, Italy |
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Abstract: | This paper explores the ability of a class of one-sector models to generate endogenous skills cycles. Skills cycles are here defined as endogenous fluctuations of the composition of equilibrium allocation of labor services. We consider a one sector economy in which there exist one type of capital stock and a finite number of different labor services, which are assumed to be heterogeneous along the skill/productivity dimension. We apply the Hopf bifurcation theorem and provide necessary conditions on the model’s parameters for having a closed orbit as the economy’s stable set. We also develop a numerical example (based on the United States economy) showing how this closed orbit can appear under reasonable parameter values. |
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