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Long-term growth and short-term economic instability

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  • Martin, Philippe
  • Ann Rogers, Carol

Abstract

When learning-by-doing is at the origin of growth, we show that growth rates should be negatively related to the amplitude of the business cycle if the growth rate in human capital is increasing and concave in the cyclical component of production. Empirical evidence strongly supports this finding for industrialized countries and European regions. Using the standard control variables, we find that countries and regions that have higher standard deviations of growth and of unemployment have lower growth rates. The result does not come from an effect of instability on investment. The negative relation does not hold for non-industrialized countries, however, for which learning-by-doing may not to be the main engine of growth.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 44 (2000)
Issue (Month): 2 (February)
Pages: 359-381

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Handle: RePEc:eee:eecrev:v:44:y:2000:i:2:p:359-381

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  1. Martin, Philippe & Rogers, Carol Ann, 1997. "Stabilization Policy, Learning-by-Doing, and Economic Growth," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 152-66, April.
  2. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
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  7. 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.
  8. Bean, C., 1989. "Endogenous Growth And The Procyclical Behaviour Of Productivity," Papers 369, London School of Economics - Centre for Labour Economics.
  9. Garey Ramey & Valerie A. Ramey, 1991. "Technology Commitment and the Cost of Economic Fluctuations," NBER Working Papers 3755, National Bureau of Economic Research, Inc.
  10. Ben S. Bernanke, 1980. "Irreversibility, Uncertainty, and Cyclical Investment," NBER Working Papers 0502, National Bureau of Economic Research, Inc.
  11. Saint-Paul, G., 1992. "Productivity growth and the Structure of the Business Cycle," DELTA Working Papers 92-16, DELTA (Ecole normale supérieure).
  12. Alesina, Alberto, et al, 1996. " Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
  13. Pierre Danthine, Jean & Donaldson, John B., 1993. "Methodological and empirical issues in real business cycle theory," European Economic Review, Elsevier, vol. 37(1), pages 1-35, January.
  14. Stadler, George W, 1990. "Business Cycle Models with Endogenous Technology," American Economic Review, American Economic Association, vol. 80(4), pages 763-78, September.
  15. Young, Alwyn, 1993. "Invention and Bounded Learning by Doing," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 443-72, June.
  16. Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 561-83, August.
  17. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
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