Stabilization Policy, Learning-by-Doing, and Economic Growth

Philippe Martin and Carol Rogers ()

Oxford Economic Papers, 1997, vol. 49, issue 2, 152-66

Abstract: This paper shows that fiscal policy, when used for stabilization purposes, can have a positive effect on the economy's growth, on human capital accumulation, and on welfare. The authors introduce stochastic productivity shocks into a model in which productivity is augmented through learning-by-doing. If future benefits of learning-by-doing are not fully internalized by workers, then recessions are periods in which opportunities for acquiring experience are foregone. The authors identify configurations of disturbances and other parameters for which a countercyclical policy maximizes growth and welfare. Copyright 1997 by Royal Economic Society.

Date: 1997
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Working Paper: Stabilization Policy, Learning by Doing, and Economic Growth (1995)
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