GROWTH AND CYCLES, IN THE MODE OF MARX AND SCHUMPETER

I propose a theory of endogenous growth and cycles under competitive conditions. Firms choose how many workers to hire, how much to invest, and which technologies to use. New capacity, embodying labor‐saving technologies, is costlier than old one but allows for a lower wage bill. The interaction between labor‐saving innovations and changes in the relative price of labor is the source of growth cycles.