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Schumpeterian Restructuring

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  • Patrick Francois

    ()
    (University of British Columbia)

  • Huw Lloyd-Ellis

    ()
    (Queen's University)

Abstract

We develop a Shumpeterian theory of business cycles that relates job creation, job destruction and wages over the cycle to the processes of firm restructuring, innovation and implementation that drive long-run growth. Due to incentive problems, production workers are employed via relational contracts and experience involuntary unemployment. Job destruction and firm turnover are counter-cyclical, but labour productivity growth and job creation are pro-cyclical. Endogenous fluctuations in job creation on the intensive margin are the dominant source of changes in employment growth. Our framework also highlights the counter-cyclical forces on wages due to restructuring, and illustrates the relationship between the cyclicality of wages and long-run productivity growth. 052

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Bibliographic Info

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1039.

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Length: 46 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:qed:wpaper:1039

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Keywords: Intrinsic business cycles; job creation and destruction; innovation; wage cyclicality;

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References

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Cited by:
  1. Patrick Francois & Huw Lloyd-Ellis, 2005. "I - Q Cycles," Working Papers 1040, Queen's University, Department of Economics.
  2. Mauro Boianovsky & Hans-Michael Trautwein, 2008. "Schumpeter on unemployment," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807181726240, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].

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