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Schumpeterian Restructuring

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Author Info
Patrick Francois () (University of British Columbia)
Huw Lloyd-Ellis () (Queen's University)

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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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File URL: http://www.econ.queensu.ca/working_papers/papers/qed_wp_1039.pdf
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File Function: First version 2005
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Publisher 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
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Handle: RePEc:qed:wpaper:1039

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

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Find related papers by JEL classification:
E0 - Macroeconomics and Monetary Economics - - General
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

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References listed on IDEAS
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.:
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  19. 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!]
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    • 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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  21. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June. [Downloadable!] (restricted)
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Full references

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. Patrick Francois & Huw Lloyd-Ellis, 2005. "I - Q Cycles," Working Papers 1040, Queen's University, Department of Economics. [Downloadable!]
    Other versions:
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