Part I: Technology, Competition and Growth
Part I of this paper proposes a model of endogenous growth, in which the scale of individual production units is endogenously determined in a novel way. The basic model has desirable growth and static properties, including the following:
(1) The economy exhibits productivity growth at a constant rate that only depends on technology parameters; (2) at the aggregate level, the economy is identical to the neoclassical growth model, thus (3) featuring the full medium-term capital dynamics familiar from this framework; moreover, (4) the model explains why the aggregate production function and many industries exhibit constant returns to scale; (5) there are no unrealistic constraints on the firm-level production technology; in particular, production is not linear in a capital-like input and (6) the notion that R&D investments become less effective with rising technology levels is accounted for; (7) generally, there are no knife-edge conditions or implausible scale effects; (8) no particular assumptions regarding market power or the competitive structure of industries are required; markets can be modelled as perfectly competitive, but the framework is robust to alternative assumptions such as monopolistic competition; (9) being based on the quality-ladder idea, the model can be extended to feature the rich industry-level dynamics that have been studied using Schumpeterian growth models; (10) in its basic version, the model is far simpler while being more general than popular models of endogenous growth.

Part II: Business Cycles and Unemployment
The growth framework presented in part I of this paper is extended to include labour market frictions, resulting in a model that has interesting cyclical properties, including the following:
(1) In response to investment-reducing shocks, the model endogenously creates recessions followed by drawn-out recoveries, closely resembling time series data on unemployment, output, investment and asset prices; (2) recessions are fully explained as periods during which frictions prevent instantaneous reallocation, resulting in (3) stock market crashes at the beginning of recessions; (4) the persistently elevated unemployment following recessions is explained as a result of investment dynamics; (5) the model incorporates a mechanism that strongly amplifies investment-reducing shocks while dampening investment-increasing shocks; this leads to (6) a pronounced asymmetry in business cycles, even for symmetric shocks; (7) the model further explains why output can be above trend during investment booms; (8) cyclical fluctuations can be triggered by a variety of shocks, including for example productivity or financial shocks; (9) the model is capable of expectation-driven cycles: the anticipation of future changes can trigger investment booms or recessions without the need for any contemporary productivity changes; (10) the shape of recessions and recoveries is largely driven by model mechanics, and does not rely on particular characteristics of the shock; (11) the model matches the usual cyclical correlations as well as typical RBC models, and in addition to that replicates the skewness of cyclical variables; (12) the model is simpler than most alternative business cycle frameworks and more robust with regards to its reliance on household characteristics for cyclical patterns.