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Implementation cycles, growth and the labor market

Author

Listed:
  • Francois Patrick

    (Department of Economics, University of British Columbia, Vancouver, BC, Canada, CEPR and CIFAR)

  • Lloyd-Ellis Huw

    (Department of Economics, Queen’s University, Kingston, Ontario, Canada K7L 3N6)

Abstract

We develop a theory of growth and cycles that endogenously relates job flows, worker flows and wages over the cycle to the processes of restructuring, innovation and implementation that drive long-run growth. Expansions are the result of clustered implementation of new ideas and recessions are the negative consequence of the restructuring that anticipates them. Due to incentive problems, production workers are employed via relational contracts and experience involuntary unemployment. Separation rates and firm turnover are counter-cyclical, but labor productivity growth and hiring rates are procyclical. 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.

Suggested Citation

  • Francois Patrick & Lloyd-Ellis Huw, 2013. "Implementation cycles, growth and the labor market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 287-329, July.
    • Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:43:n:5
    DOI: 10.1515/bejm-2012-0137
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    References listed on IDEAS

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    1. Matsuyama, Kiminori, 2001. "Growing through Cycles in an Infinitely Lived Agent Economy," Journal of Economic Theory, Elsevier, vol. 100(2), pages 220-234, October.
    2. Stephen Nickell & Daphne Nicolitsas & Malcolm Patterson, 2001. "Does Doing Badly Encourage Management Innovation?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(1), pages 5-28, February.
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    8. Bental, Benjamin & Peled, Dan, 1996. "The Accumulation of Wealth and the Cyclical Generation of New Technologies: A Search Theoretic Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 687-718, August.
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    Cited by:

    1. Yuichi Furukawa, 2015. "Leapfrogging cycles in international competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(2), pages 401-433, June.

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    More about this item

    Keywords

    Endogenous cycles; endogenous growth; employment flows; wage rigidity; JEL codes: E0; E3; O3; O4;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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