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Productivity Growth and the Structure of the Business Cycle

Author

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  • Saint-Paul, Gilles
Abstract
Over recent years `opportunity cost' (OC) models of growth have been constructed which suggest that firms take advantage of the possibility of intertemporal subsitution in order to engage in productivity-improving activities during recessions. This paper tests whether this argument is correct, using a semi-structural vector autoregression to distinguish the trend from the cycle. The results are mildly supportive of the OC theory. Demand shocks tend to have a negative impact on productivity, both in the short and long run, and the short-run impact is stronger in those countries where fluctuations are more transitory. There is no evidence, however, of a significant R&D response to demand shocks.

Suggested Citation

  • Saint-Paul, Gilles, 1992. "Productivity Growth and the Structure of the Business Cycle," CEPR Discussion Papers 709, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:709
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    Keywords

    Business Cycles; Growth; Productivity; Research and Development;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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