Optimal Stabilization Policy in the Presence of Learning by Doing

Philippe Martin and Carol Rogers ()

No 1129, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The paper analyses, along the transition path and in steady state, the optimal stabilization policy in an economy in which growth is driven by learning by doing. If future benefits of learning by doing are not fully internalized by workers the optimal fiscal policy is to tax labour during expansions so as to be able to subsidize it during recessions. The long-term impact on output and on human capital of such a policy depends critically on initial conditions: if stabilization is initiated during an expansion its effect on long-term production is positive. The long-term effect is negative when stabilization is initiated during a recession.

Keywords: Cycles; Growth; Learning By Doing; Stabilization Policy (search for similar items in EconPapers)
JEL-codes: E32 H21 O40 (search for similar items in EconPapers)
Date: 1995-02
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Citations: View citations in EconPapers (3)

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Journal Article: Optimal Stabilization Policy in the Presence of Learning by Doing (2000)
Working Paper: Optimal Stabilization Policy in the Presence of Learning by Doing (2000)
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