INDETERMINACY IN A ONE-SECTOR MODEL REVISITED: DEMAND VERSUS SUPPLY-SIDE INDETERMINACY
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The One
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This paper explains how indeterminacy in a one-sector model may arise due to externalities in the disutility of labor supply, which is termed as demand-side indeterminacy. This contrasts supply-side indeterminacy that is driven by externalities in the production function as exemplified by Benhabib and Farmer (Journal of Economic Theory, 1994). For the one-sector models considered, I find that indeterminacy arises more easily from the demand than from the supply side. In addition, demand and supply-side indeterminacy generate different cyclical patterns of wages, a feature that is useful for identifying episodes of self-fulfilling prophecies within the two types of indeterminacy.
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2012 ◽
Vol 136
(1)
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pp. 172-184
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2019 ◽
Vol 2
(1)
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pp. 1-8
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2014 ◽
Vol 100
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pp. 72-83
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