Growth, Cycles And Welfare: A Schumpeterian Perspective

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 1090, Working Paper from Economics Department, Queen's University

Abstract: We use a Schumpeterian model in which both the economy's growth rate and its volatility are endogenously determined to assess some welfare and policy implications associated with business cycle fluctuations. Because it features a higher average growth rate than its acyclical counterpart, steady-state welfare is higher along the cyclical equilibrium growth path of the model. We assess the impact of alternative stabilization policies designed to smooth cyclical fluctuations. Although, it is possible to significantly reduce the variance of output growth via simple policy measures, the welfare benefits are at best negligible and at worst completely offset by the resulting reduction long-term productivity growth.

Keywords: Endogenous cycles; Endogenous growth; Welfare; Stabilization policy (search for similar items in EconPapers)
JEL-codes: E0 E1 O3 O4 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2006-09
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1090

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