In this paper, we highlight the possibility of dynamically inefficient equilibria in a model with strictly convex production function at the firm’s level. Decreasing returns imply the existence of some pure profit and hence of an asset market. We endogenise the number of firms by introducing a sunk cost that is to be paid upon entering into the market; since this cost is assumed to be constant, the number of firms increases over time in response to population growth (and aggregate returns to scale are constant). It turns out that the growth of the number of firms reduces the rate used to discount future profits, allowing for dynamic inefficiency. We also consider the presence of a constant and exogenous probability of failure affecting firms.

Economists often compare two ways of work sharing: increase of part-time work and the reduction of the weekly work time. Most of the literature focuses upon the labour demand size. The aim of this paper is to tackle this question from the point of view of labour supply. We calibrate on French data a sequential job search model, which as two specific features: the characterization of job offers in terms of utility level which combines hourly wage rates with available leisure time and the fact that unemployment is not the only compatible state with a job search. Simulations of the model show that, for a given labour demand, the probability to be unemployed increases with the proportion of part-time jobs and decrease with the reduction of the weekly work time.

This paper is a follow-up on Section 5 of Drèze, Malinvaud et al.’s 1994 position paper on “Growth and Employment: The Scope for a European Initiative”, in favour of policies aiming to sustain demand through investments, without aggravating public deficits. We build on several recent papers to investigate further the argument. We first briefly review a nonstandard theoretical model based upon contemporaneous thinking about incompleteness of markets, and its econometric validation. This analysis suggests that policies aimed at stimulating aggregate activity and supporting more optimistic expectations may be needed to achieve faster growth in economies suffering from persistent underutilisation of resources. We next elaborate on the principle of employment subsidies, with reference to housing. At times of severe unemployment, a correct evaluation of investment projects must take into account the wedge between the private and the social cost of labour. This labour cost distortion generates a discouting distortion. We briefly discuss both and derive implications for investment stimulation policies. We also review the main problems of implementation of a European investment program and report on a preliminary attempt at checking the applicability to housing in Wallony.

L’introduction des profits dans les fonctions d’investissement s’inscrit dans le cadre du retour de l’argument empirique sur les spécifications proposées par Jorgenson. Selon la théorie de la profitabilité les entreprises ont une demande d’investissement croissante avec le rapport taux de profit de pleine capacité/taux d’intérêt afin de se prémunir contre l’incertitude de la demande ou de gagner des parts de marché (effet de clientèle). La théorie des contraintes financières définit une offre d’investissement dépendant des profits réalisés, du ratio d’endettement et du taux d’intérêt réel anticipé. On estime un modèle de déséquilibre d’investissement avec CES par le maximum de vraisemblance et le pseudo maximum de vraisemblance simulé; robustes au changement de méthode: les profits réalisés, la profitabilité, le ratio endettement/capital et la demande anticipée. Les contraintes financières ne s’exercent pas forcément lorsque le ratio d’endettement est élevé et la chute de l’offre d’investissement est plus forte que la chute de la demande en phase de récession. Le report des contraintes financières est plutôt négatif (comportement « rationnel » vs « extrapolatif »).