Essays On The Theory Of Growth And Unemployment
The thesis comprises two essays that investigate the theoretical properties and empirical performance of dynamic equilibrium models designed to account for the phenomena of aggregate economic growth and unemployment.;The first essay, entitled Business Cycles and Labor Market Search, is primarily interested in providing a quantitative assessment of a particular brand of search/unemployment theory in the context of a dynamic, stochastic, general equilibrium business cycle model. In order to ascertain the likely quantitative importance of the propagation mechanism induced by the search environment, an artificial economy is parameterized, calibrated, and simulated. The statistical properties of the simulated business fluctuations are then compared to their empirical counterparts generated by the postwar U.S. economy. The results of this exercise demonstrate that the search environment under consideration appears to add significantly to the persistence properties of economic aggregates, but not to the amplitude of their fluctuations. As well, while the model correctly predicts a negative relationship between vacancies and unemployment (the Beveridge curve), the model underestimates the quantitative magnitude of the correlation. By identifying the model's deficiencies along certain dimensions, the results reported in this essay may hopefully provide future researchers with a guide as to the margins along which the theory may be most usefully extended.;The second essay, entitled Endogenous Technological Change, Growth and Aggregate Fluctuations, develops a model of the economy in which the development and spread of technological innovations is endogenous. In the model, production and learning activities on the part of competitive firms interact with the consumption/saving decisions of households to generate growth and fluctuations in aggregate economic activity. The model's structural parameters are estimated by maximum likelihood and the estimated model is used to interpret the pattern of economic development in the postwar American economy. One result of this exercise pertains to the importance of imitation activity for generating economic growth--the model estimates that at any given date, over three-quarters of all resources devoted to learning are accounted for by firms trying to copy existing ideas. The model suggests that while innovation is the mechanism that ensures the continuance of long-term economic growth, the primary determinant of the rate and volatility of economic growth is imitation.
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