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Schumpeterian Restructuring

Author

Listed:
  • Patrick Fracois

    (University of British Columbia)

  • Huw Lloyd-Ellis

    (Queen's University)

Abstract

We develop a Shumpeterian theory of business cycles that relates job creation, job destruction and wages over the cycle to the processes of firm restructuring, innovation and implementation that drive long-run growth. Due to incentive problems, production workers are employed via relational contracts and experience involuntary unemployment. Job destruction and firm turnover are counter-cyclical, but labour productivity growth and job creation are pro-cyclical. Endogenous fluctuations in job creation on the intensive margin are the dominant source of changes in employment growth. Our framework also highlights the counter-cyclical forces on wages due to restructuring, and illustrates the relationship between the cyclicality of wages and long-run productivity growth. 052

Suggested Citation

  • Patrick Fracois & Huw Lloyd-Ellis, 2005. "Schumpeterian Restructuring," Working Paper 1039, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1039
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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1039.pdf
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    References listed on IDEAS

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    Cited by:

    1. Patrick Francois & Huw Lloyd- Ellis, 2005. "I - Q Cycles," Macroeconomics 0511023, University Library of Munich, Germany.
    2. Mauro Boianovsky & Hans-Michael Trautwein, 2010. "Schumpeter on unemployment," Journal of Evolutionary Economics, Springer, vol. 20(2), pages 233-263, April.

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    More about this item

    Keywords

    Intrinsic business cycles; job creation and destruction; innovation; wage cyclicality;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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