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Implementation cycles, growth and the labor market

Patrick Francois () and Huw Lloyd-Ellis

The B.E. Journal of Macroeconomics, 2013, vol. 13, issue 1, 287-329

Abstract: We develop a theory of growth and cycles that endogenously relates job flows, worker flows and wages over the cycle to the processes of restructuring, innovation and implementation that drive long-run growth. Expansions are the result of clustered implementation of new ideas and recessions are the negative consequence of the restructuring that anticipates them. Due to incentive problems, production workers are employed via relational contracts and experience involuntary unemployment. Separation rates and firm turnover are counter-cyclical, but labor productivity growth and hiring rates are procyclical. 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.

Keywords: Endogenous cycles, endogenous growth, employment flows, wage rigidity, JEL codes: E0; E3; O3; O4 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1515/bejm-2012-0137

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