Author(s):
Costa, Luís F. 
; Dixon, Huw D.
Date: 2005
Persistent ID: http://hdl.handle.net/10400.5/2684
Origin: Repositório da UTL
Subject(s): Entry; Hysteresis; Mark-up
Document details
A simple business-cycle model with schumpeterian features
Description
We develop a dynamic general equilibrium model of imperfect competition where a sunk cost of creating a new product regulates the type of entry that dominates in the economy: new products or more competition in existing industries. Considering the process of product innovation is irreversible, introduces hysteresis in the business cycle. Expansionary shocks may lead the economy to a new 'prosperity plateau,' but contractionary shocks only affect the market power of mature industries.
We develop a dynamic general equilibrium model of imperfect competition where a sunk cost of creating a new product regulates the type of entry that dominates in the economy: new products or more competition in existing industries. Considering the process of product innovation is irreversible, introduces hysteresis in the business cycle. Expansionary shocks may lead the economy to a new 'prosperity plateau,' but contractionary shocks only affect the market power of mature industries.
Document Type
Other
Language English
Language English
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