A liquidity crunch in an endogenous growth model with human capital

There is by now reasonable evidence that supports the notion of a trend break in US GDP since Great Recession. To explain this phenomenon, I construct version Lucas endogenous growth model, amplified with financial frictions and disruptions firms' sector. then show how transitory liquidity crunch capable, at least qualitatively, producing similar pattern persistent downward shift as one could infer happened 2008. The main mechanism which such result found relies on workers' decisions providing labor to firms versus accumulating human capital. reduces demand labor. Workers anticipating phase depressed wages make decision more capital short run, thereby reducing supply firms. In long however, incentivized strong recovery, workers decrease accumulation increase supply. Under plausible parametrizaions situation produces net effect overall productivity permanently economy was growing prior crisis.