Working Paper: CEPR ID: DP1642
Authors: Gilles Saint-Paul
Abstract: This survey discusses the effect of macroeconomic fluctuations on long-run growth from both a theoretical and empirical perspective. It emphasizes the ?opportunity cost? approach, which states that firms will intertemporally substitute productivity-enhancing activities for regular production activity during recessions. It provides aggregate evidence in favour of the opportunity cost approach.
Keywords: business cycles; productivity; long-run growth; labour hoarding; restructuring; endogenous growth
JEL Codes: E32; O3; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| recessions (E32) | productivity-enhancing activities (O49) |
| productivity-enhancing activities (O49) | long-run productivity (O49) |
| recessions (E32) | long-run productivity (O49) |
| elimination of inefficient production sites during recessions (R32) | efficient allocation of resources (D61) |
| efficient allocation of resources (D61) | long-run productivity (O49) |
| labor hoarding (J23) | distorted productivity measures (E23) |