Abstract
This paper presents a model of endogenous business cycles in the presence of knowledge spillovers and a time-to-build restriction. There are two key assumptions that characterize the model: (i) the payoff to each firm depends on the aggregate state of knowledge, and (ii) the innovation of a project is time-consuming. Under those assumptions, a simple structure is shown to be described by a piecewise linear difference equation with a discontinuity. We show that the resulting dynamics generated by such a dynamical system leads to an asymmetric periodic cycle of arbitrary period that appears to switch repeatedly between different regimes.
Original language | English |
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Pages (from-to) | 175-189 |
Number of pages | 15 |
Journal | Journal of Economic Behavior and Organization |
Volume | 54 |
Issue number | 2 |
DOIs | |
Publication status | Published - Jun 1 2004 |
Keywords
- Asymmetric periodic cycles
- Knowledge spillovers
- Piecewise linear difference equation
- Threshold nonlinearities
- Time-to-build
ASJC Scopus subject areas
- Economics and Econometrics
- Organizational Behavior and Human Resource Management