In a competitive overlapping generations model, technological
irreversibilities and idiosyncratic uncertainty generate a
misallocation of resources among segments, which takes the form of
underemployment and underutilization of capacities at the aggregate
level. This affects the qualitative properties of the equilibrium
path. Indeed, increases in the variance of the technological shock
can be responsible, a.o., for an “inescapable poverty trap,” or for
periodic orbits generating endogenous fluctuations in
underemployment.