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Discussion Paper Details

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Title: Flexibility, Investment and Growth

Author(s): Giuseppe Bertola

Publication Date: June 1990

Keyword(s): Efficient Allocation, Flexibility, Growth, Idiosyncratic Shocks and Job Security

Programme Area(s): Applied Macroeconomics and International Macroeconomics

Abstract: This paper proposes a model of endogenous growth with diversifiable uncertainty, irreversible investment decisions and imperfect labour mobility. Obstacles to labour reallocation lower the operating profits earned by existing firms and increase the cost of creating new ones, thus reducing investment, growth and welfare in decentralized equilibrium. The model's macroeconomic framework is appropriate for a study of labour contracts, of capital- and labour-market imperfections, and of industrial policy.

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Bibliographic Reference

Bertola, G. 1990. 'Flexibility, Investment and Growth'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=422