Growth, Cycles and Welfare: A Schumpeterian Perspective
AbstractWe use a Schumpeterian model in which both the economy's growth rate and its volatility are endogenously determined to assess some welfare and policy implications associated with business cycle fluctuations. Because it features a higher average growth rate than its acyclical counterpart, steady-state welfare is higher along the cyclical equilibrium growth path of the model. We assess the impact of alternative stabilization policies designed to smooth cyclical fluctuations. Although, it is possible to significantly reduce the variance of output growth via simple policy measures, the welfare benefits are at best negligible and at worst completely offset by the resulting reduction long-term productivity growth.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 1090.
Length: 26 pages
Date of creation: Sep 2006
Date of revision:
Endogenous cycles; Endogenous growth; Welfare; Stabilization policy;
Find related papers by JEL classification:
- E0 - Macroeconomics and Monetary Economics - - General
- E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-23 (All new papers)
- NEP-DGE-2006-09-23 (Dynamic General Equilibrium)
- NEP-MAC-2006-09-23 (Macroeconomics)
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