Master Thesis - Humboldt-Universität zu Berlin

Ê t = Êt−1 + Êt+1 − Êt + (1 − βξ e)(1 − ξ e )
ξ e
(ˆL t − Êt) (64)
Further, the FOC for the other imput factors, oil and imports gives the
following relative quantities:
v j t
O j,t
p
= 1 − ω − ζ
ω
(65)
v j t
M j,t
p
= 1 − ω − ζ
ζ
(66)
Total costs faced by the firms is:
T C j t = W t L j,t + Rt k K j,t + Pt o Op
j,t
+ Pt
M Mp j,t
(67)
Firms can costlessly adjust all factor of production. Thus, the perfect
mobiliy of factors between firms implies that all firms have identical marginal
cost per unit of output, MC t .
· (Rt k ) α
MC t = (1 − ω − ζ)
α α (1 − α) 1−α · ɛ a t
W 1−α
t
+ ω P t
o
+ ζPt M (68)
S t
All profits are distributed at the end of each period to households as
dividents:
Div j t+i = (P j
t+1 − MC t+i )y j t − MC t+i Φ (69)
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