Increasing returns and unsynchronized wage adjustment in sunspot models of the business cycle

• 成果类型: Article
• 署名作者: Huang, Kevin X. D.; Meng, Qinglai
• 署名单位: Vanderbilt University; Oregon State University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2011.10.013
• 发表日期: 2012
• 页码: 284-309
• 关键词: increasing returns; Relative wage; Risk aversion in labor; indeterminacy; Sunspot

摘要

A challenge to models of equilibrium indeterminacy based on increasing returns is that required increasing returns for generating indeterminacy can be implausibly large and rise quickly with the relative risk aversion in labor. We show that unsynchronized wage adjustment via a relative wage effect can both lower the required degree of increasing returns for indeterminacy to a plausible level and make it invariant to the relative risk aversion in labor. Consequently, indeterminacy and sunspot-driven fluctuations can emerge for plausible increasing returns regardless of the relative risk aversion in labor. Our model generates reasonable dynamics in terms of matching the business cycle, and sunspot shocks become more important with labor market friction. (C) 2011 Elsevier Inc. All rights reserved.