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Stabilization Policy, Learning by Doing, and Economic Growth

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Author Info
Martin, Philippe
Rogers, Carol Ann

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Abstract

This paper shows that fiscal policy, when used for stabilization purposes, can have a positive effect on the economy's growth, on human capital accumulation, and on welfare, along the transition path. We introduce symmetric productivity shocks into a model in which productivity is augmented through learning by doing. If future benefits of learning by doing are not fully internalized by workers, then recessions are periods in which opportunities for acquiring experience are foregone. We identify configurations of disturbances and other parameters for which a countercyclical policy maximizes growth and welfare.

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Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1130.

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Date of creation: Feb 1995
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Handle: RePEc:cpr:ceprdp:1130

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Related research
Keywords: Cycles; Growth; Learning By Doing; Stabilization Policy;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

Cited by:
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  2. Barbara Annicchiarico & Luisa Corrado & Alessandra Pelloni, 2008. " Long-Term Growth and Short-Term Volatility: The Labour Market Nexus," CDMA Working Paper Series 0806, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
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  3. Gomes, Orlando, 2007. "On the stability of endogenous growth models: an evaluation of the agents’ response to output fluctuations," MPRA Paper 2891, University Library of Munich, Germany. [Downloadable!]
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  4. WenShwo Fang & Stephen M. Miller, 2009. "Modeling the Volatility of Real GDP Growth: The Case of Japan Revisited," Working Papers 0904, University of Nevada, Las Vegas , Department of Economics. [Downloadable!]
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  5. Hnatkovska, Viktoria & Loayza, Norman, 2004. "Volatility and growth," Policy Research Working Paper Series 3184, The World Bank. [Downloadable!]
  6. Imbs, Jean, 2002. "Why the Link Between Volatility and Growth is Both Positive and Negative," CEPR Discussion Papers 3561, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Campbell leith & Chol-Won Li, 2001. "Unemployment and the Productivity Slowdown: A Labour Supply Perspective," Working Papers 2001_13, Department of Economics, University of Glasgow. [Downloadable!]
  8. Lopez , J. Humberto & Perry, Guillermo, 2008. "Inequality in Latin America : determinants and consequences," Policy Research Working Paper Series 4504, The World Bank. [Downloadable!]
  9. K Blackburn & A Pelloni, 2001. "On the Relationship Between Growth and Volatility in Learning-by-Doing Economies," Centre for Growth and Business Cycle Research Discussion Paper Series 01, Economics, The Univeristy of Manchester. [Downloadable!]
  10. Robert Dixon & David Shepherd, 2006. "The Cyclical Dynamics and Volatility of Australian Output and Employment," Department of Economics - Working Papers Series 968, The University of Melbourne. [Downloadable!]
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  11. Keith Blackburn & Dimitrios Varvarigos, 2008. "Human capital accumulation and output growth in a stochastic environment," Economic Theory, Springer, vol. 36(3), pages 435-452, September. [Downloadable!] (restricted)
  12. Amitava Krishna Dutt, 2006. "Aggregate Demand, Aggregate Supply and Economic Growth," International Review of Applied Economics, Taylor and Francis Journals, vol. 20(3), pages 319-336, July. [Downloadable!] (restricted)
  13. Galindev, Ragchaasuren, 2007. "Uncertainty, learning and growth," MPRA Paper 7398, University Library of Munich, Germany, revised Jan 2008. [Downloadable!]
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  14. Maria Antoinette Silgoner & Gerhard Reitschuler & Jesús Crespo-Cuaresma, 2003. "The Fiscal Smile: The Effectiveness and Limits of Fiscal Stabilizers," IMF Working Papers 03/182, International Monetary Fund. [Downloadable!]
  15. Antonio Fatás, 2002. "The Effects of Business Cycles on Growth," Working Papers Central Bank of Chile 156, Central Bank of Chile. [Downloadable!]
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