Schumpeterian Restructuring

Patrick Fracois and Huw Lloyd-Ellis
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Patrick Fracois: University of British Columbia
Authors registered in the RePEc Author Service: Patrick Francois ()

No 1039, Working Paper from Economics Department, Queen's University

Abstract: We develop a Shumpeterian theory of business cycles that relates job creation, job destruction and wages over the cycle to the processes of firm restructuring, innovation and implementation that drive long-run growth. Due to incentive problems, production workers are employed via relational contracts and experience involuntary unemployment. Job destruction and firm turnover are counter-cyclical, but labour productivity growth and job creation are pro-cyclical. Endogenous fluctuations in job creation on the intensive margin are the dominant source of changes in employment growth. Our framework also highlights the counter-cyclical forces on wages due to restructuring, and illustrates the relationship between the cyclicality of wages and long-run productivity growth. 052

Keywords: Intrinsic business cycles; job creation and destruction; innovation; wage cyclicality (search for similar items in EconPapers)
JEL-codes: E0 E3 O3 O4 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2005-07
New Economics Papers: this item is included in nep-bec, nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1039

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