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Stabilization Policy, Learning-by-Doing, and Economic Growth

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  • Martin, Philippe
  • Rogers, Carol Ann

Abstract

This paper shows that fiscal policy, when used for stabilization purposes, can have a positive effect on the economy's growth, on human capital accumulation, and on welfare. The authors introduce stochastic productivity shocks into a model in which productivity is augmented through learning-by-doing. If future benefits of learning-by-doing are not fully internalized by workers, then recessions are periods in which opportunities for acquiring experience are foregone. The authors identify configurations of disturbances and other parameters for which a countercyclical policy maximizes growth and welfare. Copyright 1997 by Royal Economic Society.

Suggested Citation

  • Martin, Philippe & Rogers, Carol Ann, 1997. "Stabilization Policy, Learning-by-Doing, and Economic Growth," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 152-166, April.
  • Handle: RePEc:oup:oxecpp:v:49:y:1997:i:2:p:152-66
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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