IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Endogenous Growth and Wave-Like Business Fluctuation

  • Mauro Bambi
  • Omar Licandro

version: September 2011 This paper is intended to answer why and how innovation activities promoting economic growth may indeed induce economic fluctuations. To this purpose, it adds an adoption lag to an otherwise standard endogenous growth model with expanding product variety. It shows that the equilibrium path admits a Hopf bifurcation where consumption, R&D and output permanently fluctuate. When adjusting to environmental changes would require some concentration of innovation activities, the associated mass of new businesses will become eventually operative at some point in the future injecting additional resources to the economy. Consumption smoothing will create a new wave of innovations, repeating it again and again as time passes. A simple quantitative exercise shows that such an endogenous mechanism relating the sources of growth and business fluctuations is not only theoretically possible but quantitatively relevant. Finally, the paper quantitatively finds that a procyclical 10% subsidy rate halving consumption fluctuations will increase the growth rate from 2.4% to 3.4% with a 9.6% increase in welfare, from which 6.3% comes from consumption smoothing.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://research.barcelonagse.eu/tmp/working_papers/533.pdf
Download Restriction: no

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 533.

as
in new window

Length:
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:bge:wpaper:533
Contact details of provider: Postal: Ramon Trias Fargas, 25-27, 08005 Barcelona
Phone: +34 93 542-1222
Fax: +34 93 542-1223
Web page: http://www.barcelonagse.eu
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Benhabib, Jess & Rustichini, Aldo, 1991. "Vintage capital, investment, and growth," Journal of Economic Theory, Elsevier, vol. 55(2), pages 323-339, December.
  2. Boucekkine, Raouf & Del Rio, Fernando & Licandro, Omar, 1999. "Endogenous vs exogenously driven fluctuations in vintage capital models," CEPREMAP Working Papers (Couverture Orange) 9901, CEPREMAP.
  3. Diego Comin & Mark Gertler & Ana Maria Santacreu, 2009. "Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations," Harvard Business School Working Papers 09-134, Harvard Business School.
  4. Hippolyte D'Albis & Emmanuelle Augeraud-Véron & Alain Venditti, 2012. "Business cycle fluctuations and learning-by-doing externalities in a one-sector model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00717198, HAL.
  5. Boucekkine, Raouf & Licandro, Omar & Puch, Luis A. & del Rio, Fernando, 2005. "Vintage capital and the dynamics of the AK model," Journal of Economic Theory, Elsevier, vol. 120(1), pages 39-72, January.
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  7. D'ALBIS Hippolyte & AUGERAUD-VERON Emmannuelle, 2007. "Competitive Growth in a Life-cycle Model: Existence and Dynamics," LERNA Working Papers 07.19.240, LERNA, University of Toulouse.
  8. Matsuyama, Kiminori, 2001. "Growing through Cycles in an Infinitely Lived Agent Economy," Journal of Economic Theory, Elsevier, vol. 100(2), pages 220-234, October.
  9. Raouf BOUCEKKINE & Patrick A. PINTUS, 2010. "Is History a Blessing or a Curse? International Borrowing without Commitment, Leapfrogging and Growth Reversals," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2010038, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  10. BOUCEKKINE, Raouf & DE LA CROIX, David, . "Information technologies, embodiment and growth," CORE Discussion Papers RP -1631, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Hippolyte D'Albis & Emmanuelle Augeraud-Véron & Alain Venditti, 2009. "Business cycle fluctuations and learning-by-doing externalities in a one-sector model," Working Papers halshs-00432267, HAL.
  12. Boucekkine, R. & Germain, M. & Licandro, O., . "Replacement echoes in the vintage capital growth model," CORE Discussion Papers RP -1275, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Benassy, Jean-Pascal, 1998. "Is there always too little research in endogenous growth with expanding product variety?," European Economic Review, Elsevier, vol. 42(1), pages 61-69, January.
  14. Benhabib Jess & Perli Roberto, 1994. "Uniqueness and Indeterminacy: On the Dynamics of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 63(1), pages 113-142, June.
  15. Mauro Bambi, 2006. "Endogenous Growth and Time-to-Build: the AK Case," Economics Working Papers ECO2006/17, European University Institute.
  16. Matsuyama, K., 1996. "Growing through cycles," DELTA Working Papers 96-18, DELTA (Ecole normale supérieure).
  17. Boucekkine, Raouf & de la Croix, David & Licandro, Omar, 2000. "Vintage Human Capital, Demographic Trends and Endogenous Growth," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2000007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  18. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  19. Ricardo J. Caballero & Mohamad L. Hammour, 1991. "The Cleansing Effect of Recessions," NBER Working Papers 3922, National Bureau of Economic Research, Inc.
  20. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  21. Diego Comin & Mark Gertler, 2003. "Medium Term Business Cycles," NBER Working Papers 10003, National Bureau of Economic Research, Inc.
  22. Koeniger Winfried & Licandro Omar, 2006. "On the Use of Substitutability as a Measure of Competition," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-9, March.
  23. Collard, Fabrice & Licandro, Omar & Puch, Luis, 2005. "The Short-Run Dynamics of Optimal Growth Models with Delays," CEPR Discussion Papers 5414, C.E.P.R. Discussion Papers.
  24. Raouf, BOUCEKKINE & David, DE LA CROIX & Omar, LICANDRO, 2006. "Vintage Capital," Discussion Papers (ECON - Département des Sciences Economiques) 2006014, Université catholique de Louvain, Département des Sciences Economiques.
  25. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  26. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  27. Adams, James D, 1990. "Fundamental Stocks of Knowledge and Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 673-702, August.
  28. Benhabib, Jess & Nishimura, Kazuo, 1983. "Competitive Equilibrium Cycles," Working Papers 83-30, C.V. Starr Center for Applied Economics, New York University.
  29. Bambi, Mauro & Fabbri, Giorgio & Gozzi, Fausto, 2009. "Optimal policy and consumption smoothing effects in the time-to-build AK model," MPRA Paper 17128, University Library of Munich, Germany.
  30. Diego Comin & Bart Hobijn, 2010. "An Exploration of Technology Diffusion," American Economic Review, American Economic Association, vol. 100(5), pages 2031-59, December.
  31. Mark Doms & Timothy Dunne, 1994. "Capital Adjustment Patterns in Manufacturing Plants," Working Papers 94-11, Center for Economic Studies, U.S. Census Bureau.
  32. Benhabib, Jess & Nishimura, Kazuo, 1979. "The hopf bifurcation and the existence and stability of closed orbits in multisector models of optimal economic growth," Journal of Economic Theory, Elsevier, vol. 21(3), pages 421-444, December.
  33. Beaudry, Paul & Portier, Franck, 2003. "Stock Prices, News and Economic Fluctuations," CEPR Discussion Papers 3844, C.E.P.R. Discussion Papers.
  34. Giuseppe Freni & Fausto Gozzi & Neri Salvadori, 2006. "Existence of optimal strategies in linear multisector models," Economic Theory, Springer, vol. 29(1), pages 25-48, September.
  35. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
  36. Geroski, P A & Walters, C F, 1995. "Innovative Activity over the Business Cycle," Economic Journal, Royal Economic Society, vol. 105(431), pages 916-28, July.
  37. Russell Cooper & John Haltiwanger & Laura Power, 1995. "Machine Replacement and the Business Cycle: Lumps and Bumps," Papers 0062, Boston University - Industry Studies Programme.
  38. Hippolyte d'Albis & Emmanuelle Augeraud-Véron & Hermen Jan Hupkes, 2012. "Discontinuous Initial Value Problems for Functional Differential-Algebraic Equations of Mixed Type," Documents de travail du Centre d'Economie de la Sorbonne 12043, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  39. Diego Comin & Bart Hobijn & Emilie Rovito, 2008. "Technology usage lags," Journal of Economic Growth, Springer, vol. 13(4), pages 237-256, December.
  40. Patrick K. Asea & Paul J. Zak, 1997. "Time-to-Build and Cycles," NBER Technical Working Papers 0211, National Bureau of Economic Research, Inc.
  41. Raouf Boucekkine & Patrick-Antoine Pintus, 2010. "Is History a Blessing or a Curse? International Borrowing without Commitment, Leapfrogging and Growth Reversals," Working Papers halshs-00535592, HAL.
  42. 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.
  43. Ben-Gad, Michael, 2003. "Fiscal policy and indeterminacy in models of endogenous growth," Journal of Economic Theory, Elsevier, vol. 108(2), pages 322-344, February.
  44. Jovanovic, Boyan & Lach, Saul, 1997. "Product Innovation and the Business Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 3-22, February.
  45. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  46. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  47. Raouf Boucekkine, 2000. "Information, Technology, Embodiment And Growth," Computing in Economics and Finance 2000 240, Society for Computational Economics.
  48. Gadi Barlevy, 2004. "The Cost of Business Cycles Under Endogenous Growth," American Economic Review, American Economic Association, vol. 94(4), pages 964-990, September.
  49. Reichlin, Pietro, 1986. "Equilibrium cycles in an overlapping generations economy with production," Journal of Economic Theory, Elsevier, vol. 40(1), pages 89-102, October.
  50. Walde, Klaus & Woitek, Ulrich, 2004. "R&D expenditure in G7 countries and the implications for endogenous fluctuations and growth," Economics Letters, Elsevier, vol. 82(1), pages 91-97, January.
  51. Diego A. Comin & Martí Mestieri, 2010. "An Intensive Exploration of Technology Diffusion," NBER Working Papers 16379, National Bureau of Economic Research, Inc.
  52. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  53. repec:inr:wpaper:246036 is not listed on IDEAS
  54. repec:hal:journl:halshs-00717198 is not listed on IDEAS
  55. Alfred Greiner & Willi Semmler, 1996. "Multiple steady states, indeterminacy, and cycles in a basic model of endogenous growth," Journal of Economics, Springer, vol. 63(1), pages 79-99, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bge:wpaper:533. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruno Guallar)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.