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Growth and Output Fluctuations

  • Li, Chol-Won

This paper sheds new light on the interaction between growth and output fluctuations. Our approach is different from the literature in that we analyse how endogenous fluctuations are affected by a faster productivity growth in the long run. Main results: (i) expansion (or contraction) occurs more (or less) frequently, (ii) expansion becomes milder but contraction severer, (iii) the amplitude of fluctuations becomes larger, (iv) the variance of output changes ambiguously, indicating a non-monotonic relationship. We also investigate how an R&D subsidy alters the nature of output fluctuations and re-examine its effect on technological change in the presence of recurrent cycles. The result questions the widely-accepted theoretical implication that a research subsidy unambiguously promotes technological progress. Copyright 2000 by Scottish Economic Society.

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Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 47 (2000)
Issue (Month): 2 (May)
Pages: 95-113

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Handle: RePEc:bla:scotjp:v:47:y:2000:i:2:p:95-113
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