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Productivity growth and the structure of the business cycle

  • Saint-Paul, Gilles

Over recent years `opportunity cost' (OC) models of growth have been constructed which suggest that firms take advantage of the possibility of intertemporal subsitution in order to engage in productivity-improving activities during recessions. This paper tests whether this argument is correct, using a semi-structural vector autoregression to distinguish the trend from the cycle. The results are mildly supportive of the OC theory. Demand shocks tend to have a negative impact on productivity, both in the short and long run, and the short-run impact is stronger in those countries where fluctuations are more transitory. There is no evidence, however, of a significant R&D response to demand shocks.

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File URL: http://www.sciencedirect.com/science/article/B6V64-45CX06J-53/2/5d7fbecade7edc34480cc508e9a53b82
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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 37 (1993)
Issue (Month): 4 (May)
Pages: 861-883

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Handle: RePEc:eee:eecrev:v:37:y:1993:i:4:p:861-883
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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