In this paper, we highlight the possibility of dynamically inefficientequilibria in a model with strictly convex production function at the firm’slevel. Decreasing returns imply the existence of some pure profit and henceof an asset market. We endogenise the number of firms by introducing a sunkcost that is to be paid upon entering into the market; since this cost isassumed to be constant, the number of firms increases over time in responseto population growth (and aggregate returns to scale are constant). It turnsout that the growth of the number of firms reduces the rate used to discountfuture profits, allowing for dynamic inefficiency. We also consider thepresence of a constant and exogenous probability of failure affectingfirms.

Economists often compare two ways of work sharing: increase of part-timework and the reduction of the weekly work time. Most of the literaturefocuses upon the labour demand size. The aim of this paper is to tackle thisquestion from the point of view of labour supply. We calibrate on Frenchdata a sequential job search model, which as two specific features: thecharacterization of job offers in terms of utility level which combineshourly wage rates with available leisure time and the fact that unemploymentis not the only compatible state with a job search. Simulations of the modelshow that, for a given labour demand, the probability to be unemployedincreases with the proportion of part-time jobs and decrease with thereduction of the weekly work time.

This paper is a follow-up on Section 5 of Drèze, Malinvaud et al.’s 1994position paper on “Growth and Employment: The Scope for a EuropeanInitiative”, in favour of policies aiming to sustain demand throughinvestments, without aggravating public deficits. We build on several recentpapers to investigate further the argument. We first briefly review anonstandard theoretical model based upon contemporaneous thinking aboutincompleteness of markets, and its econometric validation. This analysissuggests that policies aimed at stimulating aggregate activity andsupporting more optimistic expectations may be needed to achieve fastergrowth in economies suffering from persistent underutilisation of resources.We next elaborate on the principle of employment subsidies, with referenceto housing. At times of severe unemployment, a correct evaluation ofinvestment projects must take into account the wedge between the private andthe social cost of labour. This labour cost distortion generates adiscouting distortion. We briefly discuss both and derive implications forinvestment stimulation policies. We also review the main problems ofimplementation of a European investment program and report on a preliminaryattempt at checking the applicability to housing in Wallony.

L’introduction des profits dans les fonctions d’investissement s’inscritdans le cadre du retour de l’argument empirique sur les spécificationsproposées par Jorgenson. Selon la théorie de la profitabilité lesentreprises ont une demande d’investissement croissante avec le rapport tauxde profit de pleine capacité/taux d’intérêt afin de se prémunir contrel’incertitude de la demande ou de gagner des parts de marché (effet declientèle). La théorie des contraintes financières définit une offred’investissement dépendant des profits réalisés, du ratio d’endettement etdu taux d’intérêt réel anticipé. On estime un modèle de déséquilibred’investissement avec CES par le maximum de vraisemblance et le pseudomaximum de vraisemblance simulé; robustes au changement de méthode: lesprofits réalisés, la profitabilité, le ratio endettement/capital et lademande anticipée. Les contraintes financières ne s’exercent pas forcémentlorsque le ratio d’endettement est élevé et la chute de l’offred’investissement est plus forte que la chute de la demande en phase derécession. Le report des contraintes financières est plutôt négatif(comportement « rationnel » vs « extrapolatif »).