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Growth and Output Fluctuations

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  • Li, Chol-Won

Abstract

This paper sheds new light on the interaction between growth and output fluctuations. Our approach is different from the literature in that we analyse how endogenous fluctuations are affected by a faster productivity growth in the long run. Main results: (i) expansion (or contraction) occurs more (or less) frequently, (ii) expansion becomes milder but contraction severer, (iii) the amplitude of fluctuations becomes larger, (iv) the variance of output changes ambiguously, indicating a non-monotonic relationship. We also investigate how an R&D subsidy alters the nature of output fluctuations and re-examine its effect on technological change in the presence of recurrent cycles. The result questions the widely-accepted theoretical implication that a research subsidy unambiguously promotes technological progress. Copyright 2000 by Scottish Economic Society.

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Bibliographic Info

Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 47 (2000)
Issue (Month): 2 (May)
Pages: 95-113

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Handle: RePEc:bla:scotjp:v:47:y:2000:i:2:p:95-113

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  1. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  2. Aghion, P. & Saint-Paul, G., 1991. "On The Virtue of Bad Times: An Analysis of the Interaction Between Economic Fluctuations and Productivity Growth," DELTA Working Papers 91-23, DELTA (Ecole normale supérieure).
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  4. David Andolfatto & Glenn MacDonald, 1998. "Technology Diffusion and Aggregate Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 338-370, April.
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  7. J. Bradford De Long & Lawrence H. Summers, . "How Does Macroeconomic Policy Matter?," J. Bradford De Long's Working Papers _130, University of California at Berkeley, Economics Department.
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  9. Amable, Bruno, 1995. "Endogenous growth and cycles through radical and incremental innovation," CEPREMAP Working Papers (Couverture Orange) 9504, CEPREMAP.
  10. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  11. Van Ewijk, Casper, 1997. "Entry and Exit, Cycles, and Productivity Growth," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 167-87, April.
  12. Elhanan Helpman & Manuel Trajtenberg, 1996. "Diffusion of General Purpose Technologies," NBER Working Papers 5773, National Bureau of Economic Research, Inc.
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  14. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-96, September.
  15. Li, Chol-Won, 2001. "Science, Diminishing Returns and Long Waves," Manchester School, University of Manchester, vol. 69(5), pages 553-73, Special I.
  16. Kontolemis, Zenon G, 1997. "Does Growth Vary over the Business Cycle? Some Evidence from the G7 Countries," Economica, London School of Economics and Political Science, vol. 64(255), pages 441-60, August.
  17. Stadler, George W, 1990. "Business Cycle Models with Endogenous Technology," American Economic Review, American Economic Association, vol. 80(4), pages 763-78, September.
  18. Sichel, Daniel E, 1993. "Business Cycle Asymmetry: A Deeper Look," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 224-36, April.
  19. C Michelacci, 1997. "Long-Run Growth and Business Cycle Volatility," CEP Discussion Papers dp0351, Centre for Economic Performance, LSE.
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  21. Corriveau, Louis, 1994. "Entrepreneurs, Growth and Cycles," Economica, London School of Economics and Political Science, vol. 61(241), pages 1-15, February.
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Cited by:
  1. Patricia CRIFO-TILLET & Etienne LEHMANN, 2001. "Why the Kuznets Curve will always Reverse ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001036, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Patricia Crifo-Tillet & Etienne Lehmann, 2004. "Why Will Technical Change Not Be Permanently Skill-Biased?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 157-180, January.

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