nep-dge New Economics Papers
on Dynamic General Equilibrium
Issue of 2005‒03‒13
six papers chosen by
Christian Zimmermann
University of Connecticut

  1. The Missing Link By Zoltan J. Acs; Bo Carlsson; Pontus Braunerhjelm; David B. Audretsch
  2. Why Are Ethnically Divided Countries Poor? By Benjamin Bridgman
  3. Estimating Life-Cycle Parameters from Consumption Behavior at Retirement By John Laitner; Dan Silverman
  4. Elasticity of Substitution between Capital and Labor and its applications to growth and development By Samuel de Abreu Pessoa; Silvia Matos Pessoa; Rafael Rob
  5. On sustainable Pay As You Go systems. By Gabrielle Demange
  6. Free choice of unfunded systems: a first assessment. By Gabrielle Demange

  1. By: Zoltan J. Acs; Bo Carlsson; Pontus Braunerhjelm; David B. Audretsch
    Abstract: The intellectual breakthrough contributed by the new growth theory was the recognition that investments in knowledge and human capital endogenously generate economic growth through the spillover of knowledge. Endogenous growth theory does not explain how or why spillovers occur. The missing link is the mechanism converting knowledge into economically relevant knowledge. This paper develops a model that introduces a filter between knowledge and economic knowledge and identifies entrepreneurship as a mechanism that reduces the knowledge filter. A cross-country regression analysis over the period 1981-2001 provides empirical support for the model. We conclude that public policies facilitating knowledge spillovers through entrepreneurship may be an important new approach to promoting economic growth.
    Keywords: Endogenous growth, knowledge, innovation and entrepreneurship
    JEL: O10 L10
  2. By: Benjamin Bridgman
  3. By: John Laitner; Dan Silverman
    Abstract: Using pseudo-panel data, we estimate the structural parameters of a life--cycle consumption model with discrete labor supply choice. A focus of our analysis is the abrupt drop in consumption upon retirement for a typical household. The literature sometimes refers to the drop, which in the U.S. Consumer Expenditure Survey we estimate to be approximately 16%, as the "retirement--consumption puzzle." Although a downward step in consumption at retirement contradicts predictions from life--cycle models with additively separable consumption and leisure, or with continuous work-hour options, a consumption jump is consistent with a setup having nonseparable preferences over consumption and leisure and requiring discrete work choices. This paper specifies a life--cycle model with these latter two elements, and it uses the empirical magnitude of the drop in consumption at retirement to provide an advantageous method of identifying structural parameters --- most importantly, the intertemporal elasticity of substitution.
    JEL: E21 D11 D12
    Date: 2005–03
  4. By: Samuel de Abreu Pessoa (Graduate School of Economics, Fundacao Getulio Vargas); Silvia Matos Pessoa (Department of Economics, University of Pennsylvania); Rafael Rob (Department of Economics, University of Pennslyvania)
    Abstract: This paper estimates the elasticity of substitution of an aggregate production function. The estimating equation is derived from the steady state of a neoclassical growth model. The data comes from the PWT in which different countries face different relative prices of the investment good and exhibit different investment-output ratios. Then, taking advantage of this variation we estimate the long-run elasticity of substitution. Using various estimation techniques, we find that the elasticity of substitution is 0.7, which is lower than the elasticity, 1, that is traditionally used in macro-development exercises. We show that this lower elasticity reinforces the power of the neoclassical model to explain income differences across countries as coming from differential distortions.
    Keywords: Demand for Investment, Dynamic Panel Data, Elasticity of Substitution
    JEL: D24 D33 E25
    Date: 2005–03–04
  5. By: Gabrielle Demange
    Abstract: An unfunded Social Security system faces the major risk, sometimes referred to as "political risk", that future generations modify or even suppress the contributions. In order to account properly for this risk, the paper considers a political process in which the support to the system is asked from each new born generation. The analysis is conducted in an overlapping generations economy that is subject to macro-economic shocks. As a consequence, the political support varies with the evolution of the economy. The impact of various factors -intra-generational redistribution, risk aversion, financial markets, governmental debt- on the political sustainability of a pay-as-you-go system is discussed.
    Date: 2005
  6. By: Gabrielle Demange
    Abstract: The first pillars of social security systems widely differ across European countries both in the contribution rate and intra-generational redistribution. What would be the impact of these differences if EU citizens had free access to all systems? This paper aims to highlight some basic features of this question in a very simple two countries model.
    Date: 2005

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