Discussion Paper Details

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Title: Long-Term Growth and Short-Term Economic Instability

Author(s): Philippe Martin and Carol Ann Rogers

Publication Date: November 1995

Keyword(s): Economic Fluctuations, Growth, Learning-by-doing and Short-term Instability

Programme Area(s): International Macroeconomics

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.

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Bibliographic Reference

Martin, P and Rogers, C. 1995. 'Long-Term Growth and Short-Term Economic Instability'. London, Centre for Economic Policy Research.