Multiple equilibria in the Aghion–Howitt model

•We show that the simple Aghion–Howitt growth model exhibits oscillatory indeterminacy.•Innovation is high when profit margins are squeezed, wages are high, and output is low, generating a Schumpeterian cycle.•A simple calibration shows that indeterminacy occurs for quite plausible parametrizations of the share of the intermediate good.

We show that the simple Aghion–Howitt model exhibits oscillatory indeterminacy in the process of creative destruction as firms undertaking new research do not internalize their effect on existing firms. A simple calibration shows that indeterminacy occurs for quite plausible parametrizations of the share of the intermediate good.