IDEAS home Printed from https://ideas.repec.org/a/cup/macdyn/v11y2007i01p128-148_05.html
   My bibliography  Save this article

Flexibility, Sectoral Hysteresis, And Downturns

Author

Listed:
  • STEGER, THOMAS M.

Abstract

This paper sets up a two-sector growth model with sectoral hysteresis because of intersectoral factor reallocation costs. The main results are: (i) The economy under study exhibits nonergodic growth implying path-dependency (history matters) and permanent consequences of temporary shocks. (ii) Flexible economies are more likely to take advantage of technological improvements. The analysis points to a new mechanism in the flexibility-growth nexus, which complements the findings of Bertola (1994). (iii) Periods of negative growth can be explained as optimal responses of an economy to favorable technology shocks. This result sheds light on the fact that economic development is associated with recurring downturns.

Suggested Citation

  • Steger, Thomas M., 2007. "Flexibility, Sectoral Hysteresis, And Downturns," Macroeconomic Dynamics, Cambridge University Press, vol. 11(1), pages 128-148, February.
    • Handle: RePEc:cup:macdyn:v:11:y:2007:i:01:p:128-148_05
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1365100507050316/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Burgess, Simon & Mawson, Daniel, 2003. "Aggregate Growth and the Efficiency of Labour Reallocation," CEPR Discussion Papers 3848, C.E.P.R. Discussion Papers.
    2. Kyoji Fukao & Roland Benabou, 1993. "History Versus Expectations: A Comment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(2), pages 535-542.
    3. Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-791, October.
    4. Gene M. Grossman (ed.), 1996. "Economic Growth," Books, Edward Elgar Publishing, volume 0, number 553.
    5. Huffman, Gregory W. & Wynne, Mark A., 1999. "The role of intratemporal adjustment costs in a multisector economy," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 317-350, April.
    6. Bertola, Giuseppe, 1994. "Flexibility, investment, and growth," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 215-238, October.
    7. Galor, Oded & Tsiddon, Daniel, 1997. "Technological Progress, Mobility, and Economic Growth," American Economic Review, American Economic Association, vol. 87(3), pages 363-382, June.
    8. Yona Rubinstein & Daniel Tsiddon, 2004. "Coping with Technological Change: The Role of Ability in Making Inequality so Persistent," Journal of Economic Growth, Springer, vol. 9(3), pages 305-346, September.
    9. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," Economic Journal, Royal Economic Society, vol. 106(437), pages 1056-1069, July.
    10. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(2), pages 469-497.
    11. Galor, Oded, 2005. "From Stagnation to Growth: Unified Growth Theory," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 4, pages 171-293, Elsevier.
    12. Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, vol. 62(2), pages 343-361, August.
    13. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
    14. Klaus Wälde, 2005. "Endogenous Growth Cycles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 867-894, August.
    15. Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 651-667.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:bla:germec:v:7:y:2006:i::p:317-337 is not listed on IDEAS
    2. Beate Schirwitz, 2013. "Business Fluctuations, Job Flows and Trade Unions - Dynamics in the Economy," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 47.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Omer Moav, 2005. "Cheap Children and the Persistence of Poverty," Economic Journal, Royal Economic Society, vol. 115(500), pages 88-110, January.
    2. Fulvio Castellacci, 2011. "Theoretical Models of Heterogeneity, Growth and Competitiveness: Insights from the Mainstream and Evolutionary Economics Paradigms," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume II, chapter 5, Edward Elgar Publishing.
    3. Oded Galor, 2010. "The 2008 Lawrence R. Klein Lecture-Comparative Economic Development: Insights From Unified Growth Theory," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 1-44, February.
    4. Masahisa Fujita & Jacques‐François Thisse, 2003. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Loses from It?," The Japanese Economic Review, Japanese Economic Association, vol. 54(2), pages 121-145, June.
    5. Andreas Schäfer & Thomas Steger, 2014. "Journey into the Unknown? Economic Consequences of Factor Market Integration under Increasing Returns to Scale," Review of International Economics, Wiley Blackwell, vol. 22(4), pages 783-807, September.
    6. Ottaviano, Gianmarco I. P., 2001. "Monopolistic competition, trade, and endogenous spatial fluctuations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 51-77, February.
    7. Camacho, Carmen, 2013. "Migration modelling in the New Economic Geography," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 233-244.
    8. Fulvio Castellacci, 2007. "Technological regimes and sectoral differences in productivity growth ," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(6), pages 1105-1145, December.
    9. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-François Thisse, 2021. "Agglomeration And Trade Revisited," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 3, pages 59-85, World Scientific Publishing Co. Pte. Ltd..
    10. Ketteni, Elena & Mamuneas, Theofanis & Stengos, Thanasis, 2011. "The Effect Of Information Technology And Human Capital On Economic Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 15(5), pages 595-615, November.
    11. Been‐Lon Chen, 2007. "Multiple BGPs in a Growth Model with Habit Persistence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(1), pages 25-48, February.
    12. Oyama, Daisuke, 2009. "Agglomeration under forward-looking expectations: Potentials and global stability," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 696-713, November.
    13. Peri, Giovanni, 2002. "Globalization, rigidities and national specialization: a dynamic analysis," Structural Change and Economic Dynamics, Elsevier, vol. 13(2), pages 151-177, June.
    14. Been-Lon Chen, 2007. "Multiple BGPs in a Growth Model with Habit Persistence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(1), pages 25-48, February.
    15. Ottaviano, Gianmarco I. P., 1999. "Integration, geography and the burden of history," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 245-256, March.
    16. Terra, Maria Cristina T., 1999. "Tariff design with varying degrees of commitment," Journal of Development Economics, Elsevier, vol. 58(1), pages 123-147, February.
    17. Jose V. Rodriguez Mora & John Hassler, 2000. "Intelligence, Social Mobility, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 888-908, September.
    18. Mossay, Pascal, 2013. "A theory of rational spatial agglomerations," Regional Science and Urban Economics, Elsevier, vol. 43(2), pages 385-394.
    19. Maki, Taichi & Yotsuya, Koichi & Yagi, Tadashi, 2005. "Economic growth and the riskiness of investment in firm-specific skills," European Economic Review, Elsevier, vol. 49(4), pages 1033-1049, May.
    20. Patricia Crifo & Etienne Lehmann, 2001. "Why the Kuznets Curve Will Always Reverse," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00150324, HAL.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:11:y:2007:i:01:p:128-148_05. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/mdy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.