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Endogenous product scope: Market interlacing and aggregate business cycle dynamics

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Pavlov, O ORCID: 0000-0002-3961-1242 and Weder, M 2021 , Endogenous product scope: Market interlacing and aggregate business cycle dynamics.

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Abstract

This paper examines a market interlacing industry configuration in general equilibrium with multi-product firms. In contrast to previous studies which utilize market segmentation, firms produce multiple products even in the complete absence of the love of variety. Product scopes are procyclical and entry and exit of firms generates an endogenous amplification mechanism. When simulated by shocks derived from the efficiency and labor wedges, the model replicates the changes in dynamics between the pre- and post 1983 periods, and explains the hours-productivity puzzle.

Item Type: Report (Discussion Paper)
Authors/Creators:Pavlov, O and Weder, M
Keywords: multi-product firms, business cycles
Publisher: University of Tasmania
Copyright Information:

Copyright 2020 University of Tasmania

Additional Information:

Discussion Paper Series N 2021-01
JEL Classification: E32

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