Schumpeterian business cycles

Filip Rozsypal

No 320, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: This paper presents an economy where business cycles and long term growth are both endogenously generated by the same type of iid shocks. I embed a multi-sector real business cycle model into an endogenous growth framework where innovating firms replace incumbent production firms. The only source of uncertainty is the imperfectly observed quality of innovation projects. As long as the goods are complements, a successful innovation in one sector increases demand for the output of other sectors. Higher profits motivate higher innovation efforts in the other sectors. The increase in productivity in one sector is thus followed by increases in productivity in the other sectors and the initial innovation generates persistent movement in aggregate productivity.

Date: 2015
New Economics Papers: this item is included in nep-bec, nep-dge, nep-gro and nep-mac
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:320

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