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on Economic Growth |
| By: | Oded Galor; Marc Klemp; Daniel C. Wainstock |
| Abstract: | Why does inequality vary across societies? We advance the hypothesis that in a market economy, where earning differentials reflect variations in productive traits among individuals, a significant component of the differences in income inequality across societies can be attributed to variation in societal interpersonal diversity, shaped by the prehistorical out-of-Africa migration. Exploring the roots of inequality within the US population, we find supporting evidence for our hypothesis: variation in income inequality across groups of individuals originating from different ancestral backgrounds can be traced to the degree of diversity of their ancestral populations. This effect is sizable: a move from the lowest to the highest level of diversity in the sample is associated with an increase in the Gini index from the median to the 75th percentile of the inequality distribution. |
| Keywords: | inequality, diversity, culture, out-of-Africa migration |
| JEL: | D60 O10 Z10 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10496&r=gro |
| By: | Uwe Sunde; Thomas Dohmen; Benjamin Enke; Armin Falk; David Huffman; Gerrit Meyerheim |
| Abstract: | This paper studies the relationship between patience and comparative development through a combination of reduced-form analyses and model estimations. Based on a globally representative dataset on time preference in 76 countries, we document two sets of stylized facts. First, patience is strongly correlated with per capita income and the accumulation of physical capital, human capital and productivity. These correlations hold across countries, subnational regions, and individuals. Second, the magnitude of the patience elasticity strongly increases in the level of aggregation. To provide an interpretive lens for these patterns, we analyze an OLG model in which savings and education decisions are endogenous to patience, aggregate production is characterized by capital-skill complementarities, and productivity implicitly depends on patience through a human capital externality. In our model estimations, general equilibrium effects alone account for a non-trivial share of the observed amplification effects, and an extension to human capital externalities can quantitatively match the empirical evidence. |
| Keywords: | Time Preference, Comparative Development, Factor Accumulation |
| JEL: | D03 D90 O10 O30 O40 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_293v2&r=gro |
| By: | Pollak, Andreas |
| Abstract: | 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. |
| Keywords: | endogenous growth, technology, market structure |
| JEL: | E2 O3 O4 |
| Date: | 2022–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117768&r=gro |
| By: | Jesús Fernández-Villaverde; Lee Ohanian; Wen Yao |
| Abstract: | This paper studies China’s four-fold increase in per capita GDP relative to the U.S. between 1995 and 2019. First, we argue that China’s growth pattern is very similar to that of several other East Asia economies that initially grew very quickly. Second, we show that a minimalist Ramsey-Cass-Koopmans model with a parsimonious TFP catch-up process can account for China’s growth path and the growth paths of other East Asia economies at a similar stage of development. The growth paths of other East Asia economies and the model predictions suggest that China’s growth will substantially slow, so much so that we find the U.S. growth rate will likely be higher than China’s by 2043. We also find that China’s income per capita will level off at roughly 44% of the U.S. level around 2100. |
| Keywords: | China, East Asia, economic growth, Ramsey-Cass-Koopmans model, TFP catch up |
| JEL: | E10 E20 O40 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10499&r=gro |
| By: | Chu, Angus; Liao, Chih-Hsing |
| Abstract: | Does wealth inequality affect optimal patent policy? This study develops a Schumpeterian growth model with heterogeneous households to explore this question. The model features a general innovation specification that captures two common specifications as special cases: (a) the knowledge-driven specification that uses R&D labor, and (b) the lab-equipment specification that uses final output for R&D. Under the knowledge-driven specification, all households prefer the same level of patent protection. However, under the lab-equipment specification, wealthier households prefer stronger patent protection, and higher wealth inequality reduces the optimal level of patent protection and economic growth. Under the general innovation specification, strengthening patent protection has an inverted-U effect on innovation, in contrast to the positive effect under the two special cases. Furthermore, wealthier households continue to prefer stronger patent protection, and wealth inequality also reduces optimal patent protection. Therefore, all households preferring the same level of patent protection under the knowledge-driven specification is due to a knife-edge parameter condition. Calibrating the model to US data, we find that eliminating wealth inequality raises the optimal level of patent protection and economic growth. |
| Keywords: | patent policy; innovation; wealth inequality; economic growth |
| JEL: | O3 O4 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117209&r=gro |
| By: | Mdingi, Kholeka; Ho, Sin-Yu |
| Abstract: | This study examines the relationship between income inequality and economic growth in South Africa for the period 1989 to 2018. The study is motivated by the high disparity in income inequality and stagnant economic growth that South Africa is experiencing. Using the autoregressive distributed lag (ARDL) bounds testing technique, we established a long-run relationship between economic growth and income inequality. The results revealed that income inequality has a negative impact on economic growth in the long run, and no effect in the short run. These results are robust with an estimation of the ARDL procedure that considers structural breaks. Therefore, policymakers should employ strategies that entail a double effect of growth in national income and consider the distribution of income in the long run. These policies include human capital accumulation, easily accessible education, and reduction in labour market dualism. |
| Keywords: | Income inequality, economic growth, ARDL bounds test, South Africa |
| JEL: | C22 D63 O15 |
| Date: | 2023–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117733&r=gro |
| By: | Jesús Fernández-Villaverde; Lee E. Ohanian; Wen Yao |
| Abstract: | This paper studies China's four-fold increase in per capita GDP relative to the U.S. between 1995 and 2019. First, we argue that China's growth pattern is very similar to that of several other East Asia economies that initially grew very quickly. Second, we show that a minimalist Ramsey-Cass-Koopmans model with a parsimonious TFP catch-up process can account for China's growth path and the growth paths of other East Asia economies at a similar stage of development. The growth paths of other East Asia economies and the model predictions suggest that China's growth will substantially slow, so much so that we find the U.S. growth rate will likely be higher than China's by 2043. We also find that China's income per capita will level off at roughly 44% of the U.S. level around 2100. |
| JEL: | E10 E20 O40 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31351&r=gro |
| By: | Jakub Growiec; Peter McAdam; Jakub dup Muck |
| Abstract: | We supplement the “Idea Production Function” (IPF), whereby research and development (R&D) activity leads to growth, with measures of R&D capital. We construct the R&D capital stock in the United States and estimate the IPF with patent applications as R&D output, allowing for a flexible treatment of R&D productivity (over 1968–2019). The estimated substitution elasticity between R&D inputs is 0.7−0.8, which suggests that R&D capital is an essential factor in producing ideas and complementary to R&D labor. We identify a positive trend in R&D labor productivity (roughly 1 percent) and a cyclical variation of R&D capital productivity. Rather than “ideas getting harder to find, ” the R&D capital needed to find them has become scarce. |
| Keywords: | macroeconomics; Idea Production Function (IPF); R&D capital |
| JEL: | O30 O40 O47 |
| Date: | 2023–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkrw:96357&r=gro |