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Long-term growth and short-term economic instability

  • Martin, Philippe
  • Ann Rogers, Carol

When learning-by-doing is at the origin of growth, we show that growth rates should be negatively related to the amplitude of the business cycle if the growth rate in human capital is increasing and concave in the cyclical component of production. Empirical evidence strongly supports this finding for industrialized countries and European regions. Using the standard control variables, we find that countries and regions that have higher standard deviations of growth and of unemployment have lower growth rates. The result does not come from an effect of instability on investment. The negative relation does not hold for non-industrialized countries, however, for which learning-by-doing may not to be the main engine of growth.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 44 (2000)
Issue (Month): 2 (February)
Pages: 359-381

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Handle: RePEc:eee:eecrev:v:44:y:2000:i:2:p:359-381
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  1. Martin, Philippe & Rogers, Carol Ann, 1997. "Stabilization Policy, Learning-by-Doing, and Economic Growth," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 152-66, April.
  2. repec:tpr:qjecon:v:98:y:1983:i:1:p:85-106 is not listed on IDEAS
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  4. Martin, Philippe & Rogers, Carol Ann, 1995. "Optimal Stabilization Policy in the Presence of Learning by Doing," CEPR Discussion Papers 1129, C.E.P.R. Discussion Papers.
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  8. Saint-Paul, Gilles, 1992. "Productivity Growth and the Structure of the Business Cycle," CEPR Discussion Papers 709, C.E.P.R. Discussion Papers.
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  14. Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 561-83, August.
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