Journey into the Unknown? Economic Consequences of Factor Market Integration under Increasing Returns to Scale

Andreas Schaefer, Thomas Steger

Research output: Contribution to journalArticle

6 Citations (Scopus)
96 Downloads (Pure)

Abstract

What are the dynamic consequences of comprehensive integration shocks? The answer to this question appears all but trivial. A dynamic macroeconomic model is set up of a small open economy with capital mobility, migration and increasing returns to scale. The model features multiple equilibria as well as (local and global) indeterminacy. Despite its simplicity, the model creates a rich set of plausible implications. This paper clarifies the mechanics that may lead an integrating economy to the good or to the bad equilibrium by showing how fundamentals and expectations interact in the process of equilibrium selection. The model is applied to replicate two striking empirical characteristics of macroeconomic development in East Germany since 1990.
Original languageEnglish
Pages (from-to)783-807
Number of pages25
JournalReview of International Economics
Volume22
Issue number4
Early online date15 Apr 2014
DOIs
Publication statusPublished - 1 Sep 2014

Fingerprint Dive into the research topics of 'Journey into the Unknown? Economic Consequences of Factor Market Integration under Increasing Returns to Scale'. Together they form a unique fingerprint.

  • Profiles

    Cite this