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See detailEndogenous Capital- and Labor-Augmenting Technical Change in the Neoclassical Growth Model
Irmen, Andreas UL

in Journal of Economic Theory (2017)

The determinants of the direction of technical change and their implications for economic growth and economic policy are studied in the one-sector neoclassical growth model of Ramsey, Cass, and Koopmans ... [more ▼]

The determinants of the direction of technical change and their implications for economic growth and economic policy are studied in the one-sector neoclassical growth model of Ramsey, Cass, and Koopmans extended to allow for endogenous capital- and labor-augmenting technical change. We build on a recently developed micro-foundation for the competitive production sector that rests on the idea that the fabrication of output requires tasks to be performed by capital and labor (Irmen, 2017). Firms may engage in innovation investments that increase the productivity of capital and labor in the performance of their respective tasks. These investments are associated with new technological knowledge that accumulates over time and sustains long-run growth. We show that the equilibrium allocation is not Pareto-efficient since both forms of technical change give rise to an inter-temporal knowledge externality. An appropriate policy of investment subsidies may implement the efficient allocation. [less ▲]

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See detailOn microfoundations of the city
Picard, Pierre M. UL; Tabuchi, Takatoshi

in Journal of Economic Theory (2013), 148(6), 2561-2582

This paper considers the spatial structure of a city subject to final demand and vertical linkages. Individuals consume differentiated goods (or services) and firms purchase differentiated inputs (or ... [more ▼]

This paper considers the spatial structure of a city subject to final demand and vertical linkages. Individuals consume differentiated goods (or services) and firms purchase differentiated inputs (or services) in product (or service) markets where firms compete under monopolistic competition. Workers rent their residential lots in an urban land market and contribute to the production of differentiated goods and inputs. We show that firms and workers co-agglomerate and endogenously form a city. We characterize and discuss the spatial distribution of firms and consumers in such cities on one- and two-dimensional spaces. We show that final demand and vertical linkages raise the urban density and reduce the city spread. [less ▲]

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See detailOn Spatial Equilibria in a Social Interaction Model
Mossay, Pascal; Picard, Pierre M. UL

in Journal of Economic Theory (2011), 146(6), 2455-2477

Social interactions are at the essence of societies and explain the gathering of individuals in villages, agglomerations, or cities. We study the emergence of multiple agglomerations as resulting from the ... [more ▼]

Social interactions are at the essence of societies and explain the gathering of individuals in villages, agglomerations, or cities. We study the emergence of multiple agglomerations as resulting from the interplay between spatial interaction externalities and competition in the land market. We show that the geography of the spatial economy affects significantly the properties of spatial equilibria. In particular, when agents locate on an open land strip (line segment), a single city emerges in equilibrium. In contrast, when the spatial economy extends along a closed land strip (circumference), multiple equilibria with odd numbers of cities arise. Spatial equilibrium configurations involve a high degree of spatial symmetry in terms of city size and location, and can be Pareto-ranked. [less ▲]

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See detailOptimal Growth and Uncertainty: Learning
Koulovatianos, Christos UL; Mirman, Leonard; Santugini, Marc

in Journal of Economic Theory (2009), 144

We introduce learning in a Brock-Mirman environment and study the effect of risk generated by the planner’s econometric activity on optimal consumption and investment. Here, learning introduces two ... [more ▼]

We introduce learning in a Brock-Mirman environment and study the effect of risk generated by the planner’s econometric activity on optimal consumption and investment. Here, learning introduces two sources of risk about future payoffs: structural uncertainty and uncertainty from the anticipation of learning. The latter renders control and learning nonseparable. We present two sets of results in a learning environment. First, conditions under which the introduction of learning increases or decreases optimal consumption are provided. The effect depends on the strengths and directions of the two sources of risk, which may pull in opposite directions. Second, the effects of changes in the mean and riskiness of the distribution of the signal and initial beliefs on optimal consumption are studied. [less ▲]

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See detailThe Effects of Market Structure on Industry Growth: Rivalrous Non-excludable Capital
Koulovatianos, Christos UL; Mirman, Leonard

in Journal of Economic Theory (2007), 133

We analyze imperfect competition in dynamic environments where firms use rivalrous but nonexcludable industry-specific capital that is provided exogenously. Capital depreciation depends on utilization, so ... [more ▼]

We analyze imperfect competition in dynamic environments where firms use rivalrous but nonexcludable industry-specific capital that is provided exogenously. Capital depreciation depends on utilization, so firms influence the evolution of the capital equipment through more or less intensive supply in the final-goods market. Strategic incentives stem from, (i) a dynamic externality, arising due to the non-excludability of the capital stock, leading firms to compete for its use (rivalry), and, (ii) a market externality, leading to the classic Cournot-type supply competition. Comparing alternative market structures, we isolate the effect of these externalities on strategies and industry growth. [less ▲]

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See detailEndogenous Technical Change in a Competitive Economy
Hellwig, Martin; Irmen, Andreas UL

in Journal of Economic Theory (2001), 101(1), 1-39

We develop a model of endogenous growth in an economy with competitive markets. Technical change arises from the intentional actions of entrepreneurs looking for profits. Opportunities for such profits ... [more ▼]

We develop a model of endogenous growth in an economy with competitive markets. Technical change arises from the intentional actions of entrepreneurs looking for profits. Opportunities for such profits stem from inframarginal rents. This provides a counterexample to the widespread view that endogenous technical change is possible only if innovating firms can expect to reap monopoly or oligopoly rents. The model has a unique equilibrium, which involves steady growth at a positive rate. Equilibrium growth is inefficiently low because knowledge spillover effects are neglected. The inefficiency can be eliminated by an interest rate subsidy.<P>(This abstract was borrowed from another version of this item.) [less ▲]

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See detailCompetition in Multi-characteristics Spaces: Hotelling Was Almost Right
Irmen, Andreas UL; Thisse, Jacques-Francois

in Journal of Economic Theory (1998), 78(1), 76-102

Lancasterian models of product differentiation typically assume a one-dimension characteristics space. We show that standard results on prices and locations no longer hold when firms compete in a multi ... [more ▼]

Lancasterian models of product differentiation typically assume a one-dimension characteristics space. We show that standard results on prices and locations no longer hold when firms compete in a multi- characteistics space. [less ▲]

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