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Long-Term Growth and Short-Term Economic Instability

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  • Martin, Philippe
  • Rogers, Carol Ann

Abstract

When learning-by-doing is at the origin of growth, we show that growth rates should be negatively related to the amplitude of the business cycle if the growth rate in human capital is increasing and concave in the cyclical component of production. Empirical evidence strongly supports this finding for industrialized countries and European regions. Using the standard control variables, we find that countries and regions that have higher standard deviations of growth and of unemployment have lower growth rates. The result does not come from an effect of instability on investment. The negative relation does not hold for non-industrialized countries, however, for which learning-by-doing may not to be the main engine of growth.

Suggested Citation

  • Martin, Philippe & Rogers, Carol Ann, 1995. "Long-Term Growth and Short-Term Economic Instability," CEPR Discussion Papers 1281, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1281
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    More about this item

    Keywords

    Economic Fluctuations; Growth; Learning-by-doing; Short-term Instability;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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