Empirically R&D expenditure moves pro-cyclically, but the pro- cyclicality is a puzzle from the Schumpeterian point of view. The paper examines the cyclical property of R&D expenditure in the context of endogenous growth, and concludes that (i) substitutability between investing in physical...

This paper extends the seminal creative destruction growth model of Aghion/Howitt (1992) to investigate the relationship between unemployment and growth. We distinguish low-skilled and high-skilled labour and assume that a union bargains over the low-skilled labour wage. This causes...