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Growing Through Cycles

  • Kiminori Matsuyama

This paper puts the neoclassical and neo-Schumpetarian growth models in a unified framework. In doing so, it is argued that these two views of growth, one based on factor accumulation and the other based on innovation, are complementary in that they may capture different phases of a single growth experience. In the models presented here, the economy achieves sustainable growth through cycles, perpetually moving back and forth between two phases, under an empirically plausible condition. One phase is characterized by higher output growth, higher investment, no innovation and a competitive market structure. The other phases is characterized by lower output growth, lower investment, high innovation, and a more monopolistic market structure. Both investment and innovation are essential in sustaining growth indefinitely, and yet only one of them appears to play a domimant role in each phase.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1203.

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Date of creation: Jan 1996
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Handle: RePEc:nwu:cmsems:1203
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