Abstract
This paper uses a variety expansion growth model to show that an economy with a time lag between innovation and widespread use of the new product can experience growth cycles. By allowing the diffusion of innovation, the economy can exhibit period-by-period indeterminacy of expectations. If agents expect that high investment and rapid growth will take place in the future, the economy actually grows faster, and if not, the economy grows slowly.
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Furukawa, Y. Endogenous Growth Cycles. J Econ 91, 69–96 (2007). https://doi.org/10.1007/s00712-006-0246-y
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DOI: https://doi.org/10.1007/s00712-006-0246-y