Autore
Hintermaier, Thomas

Titolo
Lower bounds on externalities in sunspot models.
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 2001 - Fascicolo: 4 - Pagina iniziale: 1 - Pagina finale: 35

A method for describing preferences independently of the functional form of utility is developed for log-linearized models and applied to finding general conditions for indeterminacy in the presence of externalities. It is shown that if the elasticity of output with respect to labor in the social production function is less than unity and externalities arise from output then there are no concave utility functions consistent with indeterminacy. Considering the same assumption in the more general setting where externalities to labor and capital can be different, we prove that there are no utility functions separable in consumption and labor and no utility functions in the KPR class consistent with indeterminacy. These results show that there is an error in Bennett and Farmer (JET, 2000), who claimed that indeterminacy could occur with low externalities for non-separable preferences of the KPR form. Finally, we show that there can be sunspots below the former lower bounds, if we continue to allow for factor-specific externalities in the inputs and consider the admissible parameterspace for preferences, not restricted by functional forms.



Testo completo: http://www.iue.it/PUB/ECO2001-4.pdf

Esportazione dati in Refworks (solo per utenti abilitati)