The Informational Role of the Business Cycle

Harris Dellas

No 4076, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Economic decisions such as occupational and entrepreneurial choices may violate true comparative advantage when economic agents are uncertain about which activity best matches their talents. If relative performance varies over the business cycle (for instance, if downturns affect disproportionately those who are pursuing the wrong activity), then economic fluctuations may affect the probability and persistence of resource mismatches. The present work offers a novel, informational perspective to the business cycle and provides a link between aggregate fluctuations and the long-term allocation of resources.

Keywords: business cycles; comparative advantage; incomplete information; matching; stabilization (search for similar items in EconPapers)
JEL-codes: D83 E32 E60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-fin, nep-mac and nep-mic
Date: 2003-10
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