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Schumpeterian business cycles

Listed author(s):
  • Filip Rozsypal

    (University of Cambridge)

This paper presents an economy where business cycles and long term growth are both endogenously generated by the same type of iid shocks. I embed a multi-sector real business cycle model into an endogenous growth framework where innovating firms replace incumbent production firms. The only source of uncertainty is the imperfectly observed quality of innovation projects. As long as the goods are complements, a successful innovation in one sector increases demand for the output of other sectors. Higher profits motivate higher innovation efforts in the other sectors. The increase in productivity in one sector is thus followed by increases in productivity in the other sectors and the initial innovation generates persistent movement in aggregate productivity.

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File URL: https://economicdynamics.org/meetpapers/2015/paper_320.pdf
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Paper provided by Society for Economic Dynamics in its series 2015 Meeting Papers with number 320.

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Date of creation: 2015
Handle: RePEc:red:sed015:320
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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