Abstract
In contrast with most conventional business cycle models, empirical data show no clear correlation between real wage movements and output and employment. This paper presents a model, largely based on concepts presented by Joseph Schumpeter,in which economic growth and the business cycle are triggered by endogenous real “shocks” to technology. It suggests that the speed and magnitude by which technological “shocks” spread throughout the economy determine whether the resulting changes in real wages will be pro-or counter-cyclical.
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