DP1052 Endogenous Growth and Poverty Traps in a Cournotian Model
|Author(s):||Jordi Galí, Fabrizio Zilibotti|
|Publication Date:||November 1994|
|Keyword(s):||Endogenous Growth, Endogenous Mark-ups, Multiple Equilibria|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=1052|
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.