| Publisher | Federal Reserve Board | ||
|---|---|---|---|
| Format | 411.8KB PDF | Date added | 17 Apr 2002 |
| Topics | Financial Management, Human Capital Management | ||
| Downloads | 1 | ||
Models featuring increasing returns to scale in at least one factor of production have been used to study two separate phenomena multiplicity of self-fulfilling rational expectations equilibria (i.e. sunspots), and production schedules that optimally feature bunching. This paper shows that in a continuous-time model with increasing returns to labor (IRL) that if the economy features multiple competitive equilibria, the optimal path of investment, employment and consumption cannot be constant, or even smoothly-varying.
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