Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/221574
Authors: 
Casadesus-Masanell, Ramon
Klibanoff, Peter
Ozdenoren, Emre
Year of Publication: 
1998
Series/Report no.: 
Discussion Paper 1218
Abstract: 
When do dynamic nonconvexities at the disaggregate level translate into dynamic nonconvexities at the aggregate level? We address this question in a framework where the production of differentiated intermediate inputs is subject to dynamic nonconvexities and show that the answer depends on the degree of Hicks-Allen complementarity (substitutability) between differentiated inputs. In our simplest model, a generalization of Judd (1985) and Grossman and Helpman (1991) among many others, there are dynamic nonconvexities at the aggregate level if and only differentiated inputs are Hicks-Allen complements. We also compare dynamic equilibrium and optimal allocations in the presence of aggregate dynamic nonconvexities due to Hicks-Allen complementarities between differentiated inputs.
Document Type: 
Working Paper

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