We take a differential game approach to study the dynamic behaviour of labour managed (LM) firms, in the presence of price stickiness. We find that the oligopoly market populated by LM firms reaches the same steady state equilibrium allocation as the oligopoly populated by profit-maximising (PM) firms, provided that the LM membership and the PM labour force are set before the market game starts...

Does the availability of internal finance constrain firm growth? Or does it foster it? To answer these questions, we use a panel of 407,096 Chinese firms over the period 2000-2005. We estimate dynamic assets growth equations augmented with cash flow, and find that the growth of state owned enterprises is not affected by cash flow, while that of privately owned firms is most affected. Considerin...

We analyze recent contributions to growth theory based on the model of expanding variety of Romer (1990). In the first part, we present different versions of the benchmark linear model with imperfect competition. These include the “labequipment” model, “labor-for-intermediates” and “directed technical change”. We review applications of the expanding variety framework to the analysis of internat...

Investment-based asset pricing research highlights the role of irreversibility as a determinant of firms’ risk and expected return. In a neoclassical model of a firm with costly scale adjustment options, we show that the effect of scale flexibility (i.e., contraction and expansion options) is to determine the relation between risk and operating leverage: risk increases with operating leverage f...

We describe the evolution of productivity growth in a competitive industry with free entry and exit. The exogenous wage rate determines the firms’ engagement in labor productivity enhancing process innovation. There is a unique steady state of the industry dynamics, which is globally asymptotically stable. In the steady state, the number of active firms, their unit labor cost and supply depend ...

This paper provides a uni…ed framework to study how capital adjustment costs and uncertainty a¤ect investment dynamics and capital accumulation. It considers an ongoing …rm with stochastic downward sloping demand curve and facing three possible forms of adjustment costs: complete or partial irreversibility, …xed costs of undertaking any investment and the traditional quadratic adjustment costs....