Stabilization Policy, Growth and Learning by Doing

Carol Ann Rogers (1) , Philippe Martin (2)

1 GU - Georgetown University [Washington]
2 CEPR - Center for Economic Policy Research

This paper shows that fiscal policy, when used for stabilization purposes, can have a positive effect on the economy's growth, on human capital accumulation, and on welfare. We introduce stochastic productivity shocks into a model in which productivity is augmented through learning-by-doing If future benefits of learning-by-doing are not fully internalized by workers, then recessions are periods in which opportunities for acquiring experience are foregone. We identify configurations of disturbances and other parameters for which a countercyclical policy maximizes growth and welfare.

Domains: Economics and Finance

Carol Ann Rogers, Philippe Martin. Stabilization Policy, Growth and Learning by Doing. Oxford Economic Papers, 1997, 49 (2), pp.152 - 166. ⟨hal-03416319⟩