Growth and Cylces

Oesterreichische Nationalbank (Jubiläumsfonds)

This project will develop a theory for the endogenous emergence of economic growth and business cycles. The key argument is that new technologies will foster economic growth in the long run, but imply uncertainty about the optimal use of factor inputs in the short run, thus creating volatility and business cycles. Within this framework, we will analyze the following research questions: Will new technologies foster economic growth and business cycles? Will new technologies reduce wages and employment in the short run? Is economic policy able to dampen business cycles at the cost of lower economic growth by introducing a profit tax that may work as an automatic stabilizer? In an open economy, can capital income taxes play a similar role? Finally, does empirical evidence support the theory?