Learning-by-doing and aggregate fluctuations

An unresolved issue in business cycle theory is the endogenous propagation of shocks yielding allocations that exhibit the persistence displayed in the data. This paper explores the quantitative implications of one propagation mechanism: learning-by-doing, whose parameters are estimated using sectoral and plant level observations in the U.S. which are then integrated into a stochastic growth model with technology shocks. We conclude that …