Discussion Paper Details

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Title: Endogenous Growth and Poverty Traps in a Cournotian Model

Author(s): Jordi Galí and Fabrizio Zilibotti

Publication Date: November 1994

Keyword(s): Endogenous Growth, Endogenous Mark-ups and Multiple Equilibria

Programme Area(s): International Macroeconomics

Abstract: We analyse the implications for the dynamics of capital accumulation of market power and endogenous demand elasticities, in an environment in which the latter are affected by the number of competitors in each industry. In equilibrium the interest rate increases as capital accumulates, even though the marginal product of capital is constant. Under standard assumptions both a steady-state and a balanced growth path exist, and the possibility of multiple equilibrium paths (for given initial conditions) arises. It is argued that the latter feature matches several empirical observations.

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Bibliographic Reference

Galí, J and Zilibotti, F. 1994. 'Endogenous Growth and Poverty Traps in a Cournotian Model'. London, Centre for Economic Policy Research.