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Animal spirits meets creative destruction

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Author Info
Francois, P.
Lloyd-Ellis, H. (Tilburg University, Center for Economic Research)

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Abstract

We show how a Schumpeterian process of creative destruction can induce coordination in the timing of entrepreneurial activities across diverse sectors of the economy. Consequently, a multi-sector economy, in which sector-specific, productivity improvements are made by independent, profit-seeking entrepreneurs, can exhibit regular booms, slowdowns and downturns as an inherent part of the long-run growth process. The cyclical equilibrium that we study has a higher long-run growth rate but lower welfare than the corresponding acyclical one. We find that the cycles generated by our model share some features of actual business cycles, and that across cycling economies, a negative relationship emerges between volatility and growth.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 36.

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Date of creation: 2001
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Handle: RePEc:dgr:kubcen:200136

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Find related papers by JEL classification:
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
O3 - Economic Development, Technological Change, and Growth - - Technological Change
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
E0 - Macroeconomics and Monetary Economics - - General

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Cited by:
(explanations, 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.)

  1. Boyan Jovanovic, 2004. "Asymmetric Cycles," NBER Working Papers 10573, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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