Working Paper: CEPR ID: DP1281
Authors: Philippe Martin; Carol Ann Rogers
Abstract: When learning-by-doing is at the origin of growth, we show that growth rates should be negatively related to the amplitude of the business cycle if the growth rate in human capital is increasing and concave in the cyclical component of production. Empirical evidence strongly supports this finding for industrialized countries and European regions. Using the standard control variables, we find that countries and regions that have higher standard deviations of growth and of unemployment have lower growth rates. The result does not come from an effect of instability on investment. The negative relation does not hold for non-industrialized countries, however, for which learning-by-doing may not to be the main engine of growth.
Keywords: growth; short-term instability; economic fluctuations; learning-by-doing
JEL Codes: E32; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Amplitude of the business cycle (E32) | Long-term growth rates (O49) |
| Learning-by-doing (C99) | Long-term growth rates (O49) |
| Amplitude of the business cycle (E32) | Learning-by-doing (C99) |
| Higher standard deviations of growth and unemployment (E24) | Lower growth rates (O49) |