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Real Wages, Business Cycles and New Production Patterns

  • Richard Jenner
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    In contrast with most conventional business cycle models, empirical data show no clear correlation between real wage movements and output and employment. This paper presents a model, largely based on concepts presented by Joseph Schumpeter,in which economic growth and the business cycle are triggered by endogenous real “shocks” to technology. It suggests that the speed and magnitude by which technological “shocks” spread throughout the economy determine whether the resulting changes in real wages will be pro-or counter-cyclical. Copyright Kluwer Academic Publishers 2004

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    File URL: http://hdl.handle.net/10.1007/s11187-004-4945-x
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    Article provided by Springer in its journal Small Business Economics.

    Volume (Year): 23 (2004)
    Issue (Month): 5 (November)
    Pages: 441-452

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    Handle: RePEc:kap:sbusec:v:23:y:2004:i:5:p:441-452
    DOI: 10.1007/s11187-004-4945-x
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    1. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
    2. Huw Lloyd-Ellis, 1999. "Endogenous Technological Change and Wage Inequality," American Economic Review, American Economic Association, vol. 89(1), pages 47-77, March.
    3. Simkins, Scott P., 1994. "Do real business cycle models really exhibit business cycle behavior?," Journal of Monetary Economics, Elsevier, vol. 33(2), pages 381-404, April.
    4. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-61, May.
    5. George E. Johnson, 1997. "Changes in Earnings Inequality: The Role of Demand Shifts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 41-54, Spring.
    6. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory 93-10, Federal Reserve Bank of San Francisco.
    7. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
    8. Paul Segerstrom & Elias Dinopoulos, 1999. "A Schumpeterian Model of Protection and Relative Wages," American Economic Review, American Economic Association, vol. 89(3), pages 450-472, June.
    9. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
    10. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
    11. Abernathy, William J. & Clark, Kim B., 1985. "Innovation: Mapping the winds of creative destruction," Research Policy, Elsevier, vol. 14(1), pages 3-22, February.
    12. Robert G. King & Charles I. Plosser, 1989. "Real business cycles and the test of the Adelmans," Proceedings, Federal Reserve Bank of San Francisco.
    13. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
    14. Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September.
    15. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
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