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on Economic Growth |
| By: | Marcin Bielecki (Faculty of Economic Sciences, University of Warsaw; Narodowy Bank Polski) |
| Abstract: | The Great Recession has resulted in a seemingly permanent level shift in many macroeconomic variables. This paper presents a microfounded general equilibrium model featuring frictional labor markets and financial frictions that generates procyclical R&D expenditures and replicates business cycle features of establishment dynamics. This allows demonstrating the channels through which productivity and financial shocks influence the aggregate endogenous growth rate of the economy, creating level shifts in its balanced growth path. I find that financial shocks are an important driver of the aggregate fluctuations and their influence is especially pronounced for establishment entry. Since the growth rate of the economy can in principle be affected by policy measures, I examine the macroeconomic and welfare effects of applying several subsidy schemes. |
| Keywords: | business cycles, establishment dynamics, endogenous growth, working capital, financial shocks |
| JEL: | E32 G01 J63 J64 O3 O40 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2017-22&r=gro |
| By: | Roman G. Smirnov; Kunpeng Wang |
| Abstract: | In this paper we extend the work by Ryuzo Sato devoted to the development of economic growth models within the framework of the Lie group theory. We propose a new growth model based on the assumption of logistic growth in factors. Then we employ this growth model to derive new production functions and introduce a new notion of wage share. In the process it is shown that the new production functions compare reasonably well against relevant economic data. The corresponding problem of maximization of profit under conditions of perfect competition is solved with the aid of one of these functions. In addition, it is explained in rigorous mathematical terms why Bowley's law no longer holds true in post-1960 data. |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1711.02625&r=gro |
| By: | Marcin Bielecki (Faculty of Economic Sciences, University of Warsaw; Narodowy Bank Polski) |
| Abstract: | This paper proposes a microfounded model featuring frictional labor markets that generates procyclical R&D expenditures as a result of optimizing behavior by heterogeneous monopolistically competitive firms. This allows to show that business cycle fluctuations affect the aggregate endogenous growth rate of the economy. Consequently, transitory shocks leave lasting level effects. This mechanism is responsible for economically significant hysteresis effects that increase the welfare cost of business cycles by two orders of magnitude relative to the exogenous growth model. I show that this has serious policy implications and creates ample space for policy intervention. I find that several static and countercyclical subsidy schemes are welfare improving. |
| Keywords: | business cycles, firm dynamics, search and matching, innovation, endogenous growth |
| JEL: | E32 J63 J64 O3 O40 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2017-26&r=gro |
| By: | Richard Jaimes; Reyer Gerlagh |
| Abstract: | Between 1997 and 2014, US corn, soybean and cotton production almost fully converted to genetically modified crops. Starting around 2007, improved tight oil and shale gas technologies turned the declining US fossil fuel production into a booming industry. We study the effects of these two resource technology revolutions on US state income. We find that the shale revolution increased income in states abundant in oil and gas resources. States dependent on agricultural production also saw an increase in income, which we, however, attribute not to the GM innovation, but to a demand increase brought by the Energy Policy Act of 2005. We also document the resource boom indirect effects on other growth-enhancing activities, particularly, on private and public education expenditures, and distortionary taxation. |
| Keywords: | natural resources, economic growth, resource curse, resource blessing |
| JEL: | C21 C23 I25 H72 O13 Q33 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6778&r=gro |
| By: | Diego A. Cerdeiro; Andras Komaromi |
| Abstract: | In the cross section of countries, there is a strong positive correlation between trade and income, and a negative relationship between trade and inequality. Does this reflect a causal relationship? We adopt the Frankel and Romer (1999) identification strategy, and exploit countries' exogenous geographic characteristics to estimate the causal effect of trade on income and inequality. Our cross-country estimates for trade's impact on real income are consistently positive and significant over time. At the same time, we do not find any statistical evidence that more trade increases aggregate measures of income inequality. Heeding previous concerns in the literature (e.g. Rodriguez and Rodrik, 2001; Rodrik, Subramanian and Trebbi, 2004), we carefully analyze the validity of our geography-based instrument, and confirm that the IV estimates for the impact of trade are not driven by other direct or indirect effects of geography through non-trade channels. |
| Keywords: | Income;Trade;Growth, Inequality, Gravity model, General |
| Date: | 2017–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:17/231&r=gro |