Abstract
Standard growth theory considers a constant, endogenously defined rate of technological change that generates a log-linear evolution of economic activity. Yet, the persistent current phase of worldwide slowdown triggers the awakening of “long waves” theories. In the present paper, starting from a dynamically evolving synergy of Romer’s “fishing out” and “standing on shoulders” effects, we end up having three mechanisms that provoke a cyclical evolution of applied ideas: a direct impact through applied research’s productivity; an effect through researcher’s effort allocation; and an effect through the allocation of labour force. Putting these together, we initiate long waves of per capita (p.c.) output.
Highlights
Neoclassical growth theory prophesizes a log-linear evolution of per capita income
In the present paper, starting from a dynamically evolving synergy of Romer’s “fishing out” and “standing on shoulders” effects, we end up having three mechanisms that provoke a cyclical evolution of applied ideas: a direct impact through applied research’s productivity; an effect through researcher’s effort allocation; and an effect through the allocation of labour force
Thereby, we present an endogenous explanation of long waves using both, epistemological and micro-economic foundation
Summary
Neoclassical growth theory prophesizes a log-linear evolution of per capita income. It considers short path deflections as the stochastic result of common business cycles, while longer lasting fluctuations are perceived as the adjustment period towards a new balanced growth path, following any significant structural transformations. “long waves” tradition emphasizes the long-term cyclical variations over the history of capitalism’s development and the reoccurrence of periods of amplified downturns.. Starting from the neo-classical tradition of Romer [48] and Aghion and Howitt [49], theorists focus on the slow adjustment to the new applications in order to model the re-emergence of “long waves” Thereby they introduce an initially inverse effect of technology.
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