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on Economic Growth |
| By: | James Malley; Apostolis Philippopoulos |
| Abstract: | We develop an endogenous growth model to quantify how permanent structural policy changes that enhance the fiscal policy mix, markets functioning, and public institutions quality affect long-term growth and welfare. The reforms include increased public investment, reduced market power through lower price mark ups for patents and intermediate goods, and an improved institutional framework that reduces rent-seeking. All reforms, except lower patent prices, lead to per-capita output and welfare gains along the transition and balanced growth paths. In contrast, a lower mark up in the research sector hurts innovation, leading to lower growth over both paths and welfare losses along the transition. |
| Keywords: | endogenous growth, structural policy, welfare |
| JEL: | H30 O41 O43 |
| Date: | 2023–09 |
| URL: | https://d.repec.org/n?u=RePEc:gla:glaewp:2023_10 |
| By: | Barıs Alpaslan; Mevza Kurtulmuslar |
| Abstract: | This paper makes a contribution to the literature in a number of important ways: First, this paper offers a two-period OLG model of endogenous growth that incorporates both meritocracy and social capital: in our theoretical framework, meritocracy can promote social capital. Second, this paper provides a measure of the meritocracy degree to determine the extent to which there is an incidence of nepotism in the society this is because meritocracy is the opposite of nepotism, that is, the lower meritocracy degree, the higher nepotism is or the other way around. Third, this is the first study that has provided a solid evidence base for Turkey in linking the notion of meritocracy with social capital and explaining its implications for long-run growth. To this end, we calibrate our theoretical model based on a combination of theoretical restrictions and empirical observations. We conduct several policy experiments. We first consider an increase in the share of public spending on social capital building activities and infrastructure investment under two scenarios: each increase is financed by a cut in either other items or education. We also run a policy experiment associated with a decrease in the share of non-meritocratic political elites. In general, the findings of our policy experiments show that a higher meritocracy degree can promote social capital and therefore long-run growth. However, when an increase in the share of government spending on either social capital building activities or infrastructure investment is financed by a cut in education, in the benchmark case, the net impacts on long-run growth turn out to be negative or very small due to the trade-off effect because it seems that the cut in the share of government spending on education is detrimental to growth. |
| Keywords: | meritocracy, social capital, political capital, economic growth, Turkey |
| JEL: | D73 J10 J45 O10 O41 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2024-47 |
| By: | Lee, Sangdon |
| Abstract: | Thomas Piketty stated that widening economic inequality is an inevitable consequence of free-market capitalism, in which the rate of return (r) on capital (K) exceeds the rate of economic growth (g): r > g. Five System Dynamics models are developed to understand the underlying structure that causes economic inequality; K with r, which leads to the facts that K and capital income (Yk) exceeds national income (Y): K≫Y and Yk≫Y as time goes on. The Solow-Swan model, a fundamental reference for economic growth, describes the progressions of capital per capita (k) and income per capita (y). However, its focus on the k, y, and the key equation, dk/dt=s*y-(g_L+g_A+δ)k, obscure the fact that the K≫Y even when k and y are declining. We modified the Solow-Swan model to validate the claims by Piketty, β=K/Y → s/g. Finally, a new mortgage payment scheme called CPIP (Constant Principal and Interest Payments) is proposed as a potential solution to mitigate economic inequality. |
| Keywords: | Economic inequality, Piketty, r > g, Solow-Swan model, personal and national economic growth, taxes, K with r. |
| JEL: | E1 E17 |
| Date: | 2024–07–22 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121535 |
| By: | Karam Jo; Seula Kim |
| Abstract: | We study how friction in learning others’ technology, termed “imperfect technology spillovers, ” incentivizes firms to use different types of innovation and impacts the implications of competition through changes in innovation composition. We build an endogenous growth model in which multi-product firms enhance their products via internal innovation and enter new product markets through external innovation. When learning others’ technology takes time due to this friction, increased competitive pressure leads firms with technological advantages to intensify internal innovation to protect their markets, thereby reducing others’ external innovation. Using the U.S. administrative firm-level data, we provide regression results supporting the model predictions. Our findings highlight the importance of strategic firm innovation choices and changes in their composition in shaping the aggregate implications of competition. |
| Keywords: | competition, innovation, technology spillover, endogenous growth |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:24-40 |
| By: | Ana Aguilar; Jon Frost; Rafael Guerra; Steven Kamin; Alexandre Tombini |
| Abstract: | We examine the relationship between digital payment innovation, economic growth and informal activities in 101 economies over 2014–19. Following the economic growth literature, panel regressions relate growth rates of GDP per capita, total factor productivity (TFP) and the share of informal sector employment to lagged levels of these variables, the extent of digital payments use and various controls for endogeneity. We find that a one-percentage point increase in digital payments use is associated with increases in the growth of GDP per capita of 0.10 percentage points over a two-year period, and a decline in the share of informal sector employment of 0.06 percentage points over a two-year period. Insofar as the reported share of the population making digital payments ranges nearly from 0 to 100 percent, this is substantial. Digital payments do not appear to be significantly associated with rises in TFP, once controlling for general measures of digitalisation and government effectiveness, but they are linked to greater financial inclusion and credit access. Our results reinforce the case for government policies to encourage digital payments and, as complementary factors, access to the financial sector and information technology. |
| Keywords: | digital innovation, informal economy, productivity, economic growth |
| JEL: | G21 G23 O32 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1196 |
| By: | Stephan Heblich; David Krisztian Nagy; Alex Trew; Yanos Zylberberg |
| Abstract: | This paper studies how cities’ industrial structure shapes their life and death. Our analys is exploits the large heterogeneity in the early composition of English and Welsh cities. We extract built-up clusters from early historical maps, identify settlements at the on set of the nineteenth century, and isolate exogenous variation in the nature of their rise during the transformation of the economy by the end of the nineteenth century. We then estimate the causal impact of cities’ population and industrial specialization on their later dynamics. We find that cities specializing in a small number of industries decline in the long run. We develop a dynamic spatial model of cities to isolate the forces which govern their life and death.Intratemporally, the model captures the role of amenities, land, local productivity and trade in explaining the distribution of economic activity across industries and cities. Intertemporally, the model can disentangle the role of aggregate industry dynamics from city-specific externalities. We find that the long-run dynamics of English and Welsh cities is explained to a large extent by such dynamic externalities `a la Jacobs. |
| Keywords: | specialization; cities over time; quantitative economic geography. |
| JEL: | F63 N93 O14 R13 |
| Date: | 2023–07 |
| URL: | https://d.repec.org/n?u=RePEc:gla:glaewp:2023_09 |
| By: | Nabil Daher (EconomiX - Université Paris Nanterre) |
| Abstract: | This presentation explores the impact of natural disasters on developing countries' GDP growth tail-risk. Using quantile local projections on data for 75 developing economies from 1970–2021, my results reveal that natural disasters lead to a persistent decrease at the 10th percentile of economic growth. In addition, agricultural and industrial growth at the 10th percentile experience signi |
| Date: | 2024–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:boc:fsug24:12 |
| By: | Qichun He (China Economics and Management Academy, Central University of Finance and Economics); Xin Yang (China Economics and Management Academy, Central University of Finance and Economics); Heng-fu Zou (China Economics and Management Academy, Central University of Finance and Economics) |
| Abstract: | This paper explores the growth and welfare ects of monetary policy in a Schumpeterian vertical innovation model with automation. Money is introduced into the model via the cash-in-advance (CIA) constraints on consumption, production, automation and vertical innovation. We find that the relative strength of the cash constraints on automation and vertical innovations is crucial. If the CIA constraint is stronger (weaker) for automation, a higher nominal interest rate will lead to an increase (a decrease) in the amount of high-skilled labor allocated to vertical innovation. As a result, the automation level will decline (rise), but the vertical innovation and thereby aggregate economic growth will be faster (slower). We calibrate the model to the US economy and find a stronger cash constraint on automation. Our quantitative analysis shows that rising nominal interest rates are detrimental to automation but favorable to growth. In addition, higher nominal interest rates improve the welfare of dierent households and the aggregate welfare. As an empirical test, we find a signifficant, negative effect of the nominal interest rate on automation using cross-country panel data, consistent with our model prediction. |
| Keywords: | Monetary policy; Automation; Cash-in-advance; Schumpeterian model |
| JEL: | O42 E42 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:640 |
| By: | Battulga Gankhuu |
| Abstract: | In this study, we introduce a Gordon's dividend discount model, based on Vector Autoregressive Process (VAR). We provide two Propositions, which are related to generic Gordon growth model and Gordon growth model, which is based on the VAR process. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.19424 |
| By: | Christoph Eder (Independent, formerly JKU Linz); Martin Halla (Department of Economics, Vienna University of Economics and Business); Philipp Hilmbauer-Hofmarcher (Department of Economics, Central European University) |
| Abstract: | How does military occupation affect long-term economic development? We use the post-World War II occupation of Austria as a laboratory setting. Austria was divided into different occupation zones for ten years. The Soviet occupation was exploitative, while the Western Allied occupation was more supportive. After ten years of different occupation regimes, the regions returned to a single nation-state. We estimate the impact of different occupation regimes on long-term economic development. Methodologically, we combine a spatial regression discontinuity design with a difference-in-differences approach. We find that areas in the former Soviet zone are still less economically developed today. These areas are less populated, host fewer and lower paying jobs, and their residents are more likely to commute outside the former Soviet zone. The most plausible mechanism for these long-lasting effects are agglomeration effects triggered by a large migration shock from East to West as the population fled the advancing Soviet army. |
| Keywords: | Military occupation, migration, economic development, World War II, Austria, agglomeration effects |
| JEL: | R11 R12 R23 J61 N44 N94 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp366 |
| By: | Jun Nie; B. Ravikumar; Michael Sposi |
| Abstract: | We study the lifecycle aspect of within-country inequality that stems from capital and labor services supplied by individuals. Our environment is a combination of a multicountry trade model and an overlapping generations model with production and capital accumulation. Trade liberalization increases the measured total factor productivity in each country, which increases the marginal product of capital and incentivizes capital accumulation. Higher capital stock and higher measured productivity raise the marginal product of labor and, hence, wages. Inequality, measured by the ratio of old agents' income to that of the young, evolves over time due to capital accumulation during the transition from autarky to an open-economy world. Immediately after liberalization, inequality increases. Over time, capital accumulates at a diminishing rate and inequality declines. |
| Keywords: | trade; inequality; lifecycle; capital accumulation |
| JEL: | F11 D31 E22 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:98581 |