Recycling and endogenous cycles

Abstract : This article investigates the conditions under which deterministic cycles can emerge in a discrete-time model with infinitely lived agents and when the economy is characterized by two sectors producing two perfectly substitutable goods: a virgin good and a recycled one. The occurrence of deterministic fluctuations rests upon the countercyclical behavior of the recycling industry: an increase in present consumption implies a lower future waste activity together with a lower agents' total income, yielding a decline in next period consumption.