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Productivity Growth and the Structure of the Business Cycle

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Saint-Paul, Gilles

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Abstract

Over recent years `opportunity cost' (OC) models of growth have been constructed which suggest that firms take advantage of the possibility of intertemporal subsitution in order to engage in productivity-improving activities during recessions. This paper tests whether this argument is correct, using a semi-structural vector autoregression to distinguish the trend from the cycle. The results are mildly supportive of the OC theory. Demand shocks tend to have a negative impact on productivity, both in the short and long run, and the short-run impact is stronger in those countries where fluctuations are more transitory. There is no evidence, however, of a significant R&D response to demand shocks.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 709.

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Date of creation: Oct 1992
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Handle: RePEc:cpr:ceprdp:709

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Related research
Keywords: Business Cycles Growth Productivity Research and Development

Other versions of this item:

Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production

Cited by:
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  1. Matthew Rafferty, 2003. "Do Business Cycles Influence Long-Run Growth? The Effect of Aggregate Demand on Firm-Financed R&D Expenditures," Eastern Economic Journal, Palgrave Macmillan Journals, vol. 29(4), pages 607-618, Fall. [Downloadable!] (restricted)
  2. Klaus Walde, 2004. "Endogenous business cycles and growth," Money Macro and Finance (MMF) Research Group Conference 2003 109, Money Macro and Finance Research Group. [Downloadable!]
    Other versions:
  3. Matthew Rafferty, 2003. "Do Business Cycles Influence Long-Run Growth? The Effect of Aggregate Demand on Firm-Financed R&D Expenditures," Eastern Economic Journal, Eastern Economic Association, vol. 29(4), pages 607-618, Fall. [Downloadable!]
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    Other versions:
  6. Coen N. Teulings & Martin A. van der Ende, 2000. "A Structural Model of Tenure and Specific Investments," Tinbergen Institute Discussion Papers 00-009/3, Tinbergen Institute, revised 30 Nov 2002. [Downloadable!]
    Other versions:
  7. K Blackburn & D Varvarigos, 2006. "Human Capital Accumulation in a Stochastic Environment: Some New Results on the Relationship Between Growth and Volatility," Centre for Growth and Business Cycle Research Discussion Paper Series 74, Economics, The Univeristy of Manchester. [Downloadable!]
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  10. Klaus, WAELDE, 2003. "Endogenous growth cycles," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2004012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 15 Mar 2004. [Downloadable!]
    Other versions:
    • Klaus Wälde, 2005. "Endogenous Growth Cycles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 867-894, 08. [Downloadable!] (restricted)
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    Other versions:
  17. Gautier, P. & Broersma, L., 1994. "The timing of labor reallocation and the business cycle," Serie Research Memoranda 0029, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics. [Downloadable!]
  18. Robert A. Hart & J Malley (University of Glasgow), 1996. "Labor Productivity and the Cycle," Working Papers 9613, Department of Economics, University of Glasgow. [Downloadable!]
  19. Canton, E., 1996. "Business cycles in a two-sector model of endogenous growth," Discussion Paper 116, Tilburg University, Center for Economic Research. [Downloadable!]
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    Other versions:
  21. Philippe Aghion & Gilles Saint-Paul, 1993. "Uncovering Some Causal Relationships between Productivity Growth and theStructure of Economic Fluctuations: A Tentative Survey," NBER Working Papers 4603, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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