Flexibility, Sectoral Hysteresis, And Downturns
AbstractThis paper sets up a two-sector growth model with sectoral hysteresis because of intersectoral factor reallocation costs. The main results are: (i) The economy under study exhibits nonergodic growth implying path-dependency (history matters) and permanent consequences of temporary shocks. (ii) Flexible economies are more likely to take advantage of technological improvements. The analysis points to a new mechanism in the flexibility-growth nexus, which complements the findings of Bertola (1994). (iii) Periods of negative growth can be explained as optimal responses of an economy to favorable technology shocks. This result sheds light on the fact that economic development is associated with recurring downturns.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 11 (2007)
Issue (Month): 01 (February)
Contact details of provider:
Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Fax: +44 (0)1223 325150
Web page: http://journals.cambridge.org/jid_MDYProvider-Email:email@example.com
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oded Galor & Omer Moav, 1998.
"Ability Biased Technological Transition, Wage Inequality, and Economic Growth,"
98-14, Brown University, Department of Economics.
- Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 469-497, May.
- Yona Rubinstein & Daniel Tsiddon, 2004. "Coping with Technological Change: The Role of Ability in Making Inequality so Persistent," Journal of Economic Growth, Springer, vol. 9(3), pages 305-346, 09.
- Gregory W. Huffman & Mark A. Wynne, 1995.
"The role of intratemporal adjustment costs in a multi-sector economy,"
9508, Federal Reserve Bank of Dallas.
- Huffman, Gregory W. & Wynne, Mark A., 1999. "The role of intratemporal adjustment costs in a multisector economy," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 317-350, April.
- Galor, Oded, 1996.
"Convergence? Inferences from Theoretical Models,"
Royal Economic Society, vol. 106(437), pages 1056-69, July.
- Bertola, Giuseppe, 1990.
"Flexibility, Investment and Growth,"
CEPR Discussion Papers
422, C.E.P.R. Discussion Papers.
- Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
- Oded_Galor, 2004.
"From Stagnation to Growth:Unified Growth Theory,"
2004-15, Brown University, Department of Economics.
- Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-91, October.
- Klaus, WAELDE, 2003.
"Endogenous growth cycles,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
2004012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 15 Mar 2004.
- Fukao, Kyoji & Benabou, Roland, 1993. "History versus Expectations: A Comment," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 535-42, May.
- Galor, Oded & Tsiddon, Daniel, 1997.
"Technological Progress, Mobility, and Economic Growth,"
American Economic Review,
American Economic Association, vol. 87(3), pages 363-82, June.
- Galor, O. & Tsiddon, D., 1996. "Technological Progress, Mobility and Economic Growth," Papers 13-96, Tel Aviv.
- Galor, Oded & Tsiddon, Daniel, 1996. "Technological Progress, Mobility, and Economic Growth," CEPR Discussion Papers 1413, C.E.P.R. Discussion Papers.
- Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, vol. 62(2), pages 343-361, August.
- Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
- Thomas M. Steger, 2003.
"On the Mechanics of Economic Convergence,"
CER-ETH Economics working paper series
03/25, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.