Uniqueness and Stability of Equilibria in a Model with Endogenous Markups and Labor Supply

Yangru Wu


Junxi Zhang

The presence of public policy in models with multiple steady states is known to be capable of reducing the set of equilibria. This paper shows that in a simple growth model with endogenous markups, introducing an endogenous laborleisure choice also helps eliminate multiple steady state equilibria. Moreover, it alters the stability condition of the unique steady state as well; namely, the steady state may display damped oscillations and admit periodic orbits.

Key Words: Multiple equilibria; Endogenous markups; Endogenous labor supply.
JEL Classification Numbers: O40, C62.