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Animal Spirits Meets Creative Destruction

Listed author(s):
  • Francois, P.

    (Tilburg University, Center For Economic Research)

  • Lloyd-Ellis, H.

We show how a Schumpeterian process of creative destruction can induce coordination in the timing of entrepreneurial activities across diverse sectors of the economy.Consequently, a multi-sector economy, in which sector-specific, productivity improvements are made by independent, profit-seeking entrepreneurs, can exhibit regular booms, slowdowns and downturns as an inherent part of the long-run growth process.The cyclical equilibrium that we study has a higher long-run growth rate but lower welfare than the corresponding acyclical one.We find that the cycles generated by our model share some features of actual business cycles, and that across cycling economies, a negative relationship emerges between volatility and growth.

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File URL: https://pure.uvt.nl/portal/files/538907/36.pdf
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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2001-36.

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Date of creation: 2001
Handle: RePEc:tiu:tiucen:d583b352-a7f4-434f-8731-93fc421c7989
Contact details of provider: Web page: http://center.uvt.nl

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  19. Kiminori Matsuyama, 1999. "Growing Through Cycles," Econometrica, Econometric Society, vol. 67(2), pages 335-348, March.
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