On the Virtue of Bad Times: An Analysis of the Interaction between Economic Fluctuations and Productivity Growth
This paper develops a simple model, which shows how economic fluctuations can stimulate growth. It is shown that firms tend to invest more in productivity growth during recessions, since the opportunity cost (in terms of forgone profits) of investing capital or labour resources in technological (or managerial) improvements is lower during recessions. It is then established that the average growth rate of the economy increases with the amplitude of the fluctuations and also with their frequency, provided that the initial average duration of recession phases is sufficiently low compared with that of the expansion phases. Finally, the main results of the paper are shown to be consistent with the empirical evidence recently produced by Davis-Haltiwanger (1990) or Blanchard-Diamond (1990) concerning the cyclical behaviour of job re-allocation.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Sep 1991|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:578. 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: ()
If references are entirely missing, you can add them using this form.