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Growing Through Cycles

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  • Kiminori Matsuyama

Abstract

This paper puts the neoclassical and neo-Schumpetarian growth models in a unified framework. In doing so, it is argued that these two views of growth, one based on factor accumulation and the other based on innovation, are complementary in that they may capture different phases of a single growth experience. In the models presented here, the economy achieves sustainable growth through cycles, perpetually moving back and forth between two phases, under an empirically plausible condition. One phase is characterized by higher output growth, higher investment, no innovation and a competitive market structure. The other phases is characterized by lower output growth, lower investment, high innovation, and a more monopolistic market structure. Both investment and innovation are essential in sustaining growth indefinitely, and yet only one of them appears to play a domimant role in each phase.

Suggested Citation

  • Kiminori Matsuyama, 1996. "Growing Through Cycles," Discussion Papers 1203, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1203
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    Keywords

    Endogenous Growth; Endogenous Fluctuations; Global Analysis of Nonlinear Discrete Dynamical Systems;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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