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Journal Articles Journal of Public Economic Theory Year : 2000

Optimal Stabilization Policy in the Presence of Learning by Doing

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Abstract

This paper analyses the optimal stabilization policy when growth is driven by learning by doing. If benefits of learning by doing are not fully internalized, the optimal policy is to tax labor during expansions and to subsidize it during recessions. The long-term impact of this policy depends critically on initial conditions: If stabilization starts during an expansion, it has a positive effect on long-term production. When stabilization starts during a recession, its long-term effect is negative. The paper makes a methodological contribution in its analytical derivation of the optimal policy along the transition path as well as in the steady state.
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Dates and versions

hal-03471623 , version 1 (08-12-2021)

Identifiers

  • HAL Id : hal-03471623 , version 1
  • SCIENCESPO : 2441/9305

Cite

Philippe Martin, Carol Ann Rogers. Optimal Stabilization Policy in the Presence of Learning by Doing. Journal of Public Economic Theory, 2000, 2 (2), pp.213 - 241. ⟨hal-03471623⟩
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