|
on Economic Growth |
| By: | Adamou, Marios |
| Abstract: | Economic growth theories have provided significant insights into the mechanisms driving development, yet single-idea models often fall short in addressing the complexities of modern economies. The Solow Growth Model, endogenous growth frameworks, and structural change theories each focus on specific drivers of growth but lack a comprehensive perspective. This paper proposes an integrated overarching model that combines elements from these frameworks, including capital accumulation, human capital, technological progress, structural transformation, institutional quality, and globalisation. By addressing the limitations in existing theories and incorporating debates from Keynesian and monetarist perspectives, as well as insights from public administration and comparative policy studies, this model seeks to provide actionable strategies tailored to the UK’s persistent challenges. These challenges include addressing stagnant productivity, regional inequalities, and post-Brexit uncertainties, offering a pathway to sustainable and inclusive growth. |
| Date: | 2025–01–03 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:ezfx5 |
| By: | Jo, Karam (Korea Development Institute); Kim, Seula (Pennsylvania State University) |
| Abstract: | We study how frictions in learning others' technology, termed "imperfect technology spillovers, " impact firm innovation strategies and the aggregate economy through changes in innovation composition. We develop an endogenous growth model that generates strategic innovation decisions, where multi-product firms improve their products via own-innovation and enter new product markets through creative destruction under learning frictions. In our model, firms with technological advantages intensify own-innovation as learning frictions enable them to protect their markets from competitors, thereby reducing creative destruction of rivals. This pattern gets more pronounced when competitive pressure increases exogenously. Using U.S. administrative firm-level data, we provide regression results supporting the model predictions. |
| Keywords: | innovation, technology spillover, endogenous growth, competition |
| JEL: | L11 L25 O31 O33 O41 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17581 |
| By: | Lorenz Ekerdt |
| Abstract: | This paper studies factor usage in the R&D sector. I show that the usage of non-labor inputs in R&D is significant, and that their usage has grown much more rapidly than the R&D workforce. Using a standard growth decomposition applied to the aggregate idea production function, I estimate that at least 77% of idea growth since the early 1960s can be attributed to the growth of non-labor inputs in R&D. I demonstrate that a similar pattern would hold on the balanced growth path of a standard semi-endogenous growth model, and thus that the decomposition is not simply a by-product of rising research intensity. I then show that combining long-running differences in factor growth rates with non-unitary elasticities of substitution in idea production leads to a slowdown in idea growth whenever labor and capital are complementary. I conclude by estimating this elasticity of substitution and demonstrate that the results favor complimentarities. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:24-69 |
| By: | Tomohiro Hirano (Royal Holloway, University of London); Alexis Akira Toda (Emory University) |
| Abstract: | Historical trends suggest the decline in the importance of land as a production factor, as evidenced by the decline in the employment and GDP shares of land-intensive industries. However, land continues to be a prominent store of value, as over half of household wealth in major countries is real estate. To explain this apparent disconnection between land output and land value, in a plausible economic model with land and aggregate risk, we theoretically study the long-run behavior of land prices and identify economic conditions under which land becomes overvalued relative to the fundamentals defined by the present value of land rents. Unbalanced growth together with the elasticity of substitution between production factors plays a critical role. We establish the Land Overvaluation Theorem: when the elasticity of substitution between land and non-land factors exceeds 1 (which is natural because we can create more space by constructing taller buildings with fixed land) and technological progress is faster in nonland sectors, land overvaluation necessarily emerges. As applications of the Theorem, we present three examples. (i) Land overvaluation emerges along the long-run transition from the Malthusian agricultural economy to the modern knowledge- and service-based economy. (ii) With aggregate uncertainty, land prices exhibit recurrent stochastic fluctuations around the trend, with expansions and contractions in the size of land overvaluation. (iii) In modern economies, land use is also changing and urban land has high value. We present a model of urban land prices and show that land overvaluation emerges in the process of urban formation characterized by unbalanced growth. |
| Keywords: | aggregate uncertainty, bubble, elasticity of substitution, land price, unbalanced growth |
| JEL: | D53 G12 O41 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cfm:wpaper:2442 |
| By: | Mr. Serhan Cevik; Sadhna Naik; Keyra Primus |
| Abstract: | European countries are lagging behind in productivity growth, with significant productivity gaps across industries. In this study, we use comparable industry-level data to explore the patterns and sources of total factor productivity (TFP) growth across 28 countries in Europe over the period 1995–2020. Our empirical results highlight four main points: (i) TFP growth is driven largely by the extent to which countries are involved in scientific and technological innovation as the leader country or benefiting from stronger knowledge spillovers; (ii) the technological gap is associated with TFP growth as countries move towards the technological frontier by adopting new innovations and technologies; (iii) increased investment in information and communications technology (ICT) capital and research and development (R&D) contributes significantly to higher TFP growth; and (iv)the impact of human capital tends to be stronger when a country is closer to the technological frontier. The core findings of this study call for policy measures and structural reforms to promote innovation and facilitate the diffusion of new and existing technologies across Europe. |
| Keywords: | Total factor productivity; technology; R&D; innovation; human capital; Europe |
| Date: | 2024–12–20 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/258 |
| By: | Kim, Yong Jin |
| Abstract: | The paper presents a theoretical model and its simulation to explore the process of the fall of nations by focusing on moral and cultural decline, as well as military overstretch. In the model, a representative agent divides his time among military spending, material production, the consumption of scientific ideas and that of religious ideas. Both religious and scientific capital accumulate through learning-by-doing mechanism of the consumption of religious ideas and that of scientific ideas, respectively, at the national level. ‘Religious’ means ‘decadent’ or ‘nonproductive emotional’. Scientific capital boosts income, while religious capital does not. And wealthier nations experience increased decadence and military overstretch, which in turn accelerates moral and cultural decline, increasing the growth rate of religious capital and reducing that of scientific capital and income. The pseudo saddle path with a higher substitutability between religious and scientific idea consumption leads to a steady state like equilibrium. But it endogenously forks into one of two extreme potential outcomes, a religion (decadence) dominated path with slow income growth or a science dominated path with rapid growth, based on the initial conditions and policies. Affluent nations with a high level of decadence or of military overstretch are more prone to rapid decline after peaking, forking into a religion dominated path with slow income growth. The paper suggests that effective policy interventions, such as reducing decadence and military overstretch, increasing the consumption of scientific ideas, and maintaining balanced military spending, could help guide nations toward a science dominated path with sustained growth. These policies could prevent nations from veering into a religion dominated path with slow income growth. |
| Keywords: | the rise and fall of nations, decadence, overstretch, saddle path equilibrium, learning by doing |
| JEL: | H56 N10 O43 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:307914 |
| By: | Claude DIEBOLT (BETA/CNRS, Université de Strasbourg et Association Française de Cliométrie); Faustine PERRIN (Department of Economic History, Lund University, Lund, Sweden) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:afc:wpaper:03-24 |
| By: | Sen, A. |
| Abstract: | I examine the recent productivity growth slowdown and the emergence of digital technologies through the lens of production networks. Digital technologies are increasingly embedded in intermediate inputs, and digital-intensive sectors, often key producers of intermediate and capital goods, amplify the positive effects of these technologies across industries. I show that the slowdown in computer-specific technical change has contributed to the decline in aggregate productivity growth, particularly in digital-intensive service industries, with these effects spreading through the economy via intersectoral linkages. My estimates suggest that this accounts for around 45–55% of the productivity growth slowdown in both the UK and the US since the mid-2000s. I attribute this slowdown largely to structural changes within the computers industry, especially the rising value-added intensity of the sector. In general, production in digital technology-producing industries is characterized by perfect complementarity, explaining the waning effects of digital technologies on aggregate productivity since the mid-2000s. In light of these findings, I take a pessimistic view on the future of productivity growth. |
| Keywords: | digitalization, productivity, production networks, investment-specific technical change |
| JEL: | O30 O33 D57 O47 L86 L23 |
| Date: | 2024–12–13 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2472 |
| By: | Yuri Barreto; Rodrigo Oliveira |
| Abstract: | The economic literature has shown that exogenous transitory shocks affect education by changing the opportunity cost of children. We argue that this is only part of the explanation. When permanent, shocks may change contracts and the organization of labour by eroding the productive structure and decreasing land values. This paper studies the long-term effects of a long-lasting environmental shock on individuals' educational achievement and earnings. We investigate the 1988 witches' broom outbreak in Brazil, the world's second-leading cocoa producer at the time. |
| Keywords: | Long-run effects, Education, Earnings, Child labour, Agriculture, Shocks |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2024-73 |
| By: | Henrekson, Magnus (Research Institute of Industrial Economics); Johansson, Dan (Örebro University) |
| Abstract: | The neo-Schumpeterian growth models, which appeared in the early 1990s, have ostensibly reintroduced the entrepreneur into mainstream growth theory. However, we show that by ignoring genuine uncertainty and by assuming that profits follow an objectively true and ex ante known probability distribution, the entrepreneur is made redundant. Thus, the theory fails to exhaustively explain innovation, the role of ownership competence, profits, the function of financial markets, wealth and income distribution, and, ultimately, economic growth. These shortcomings risk leading to erroneous or overly narrow policy conclusions by overestimating the importance of supporting R&D investments. Rather, the presence of genuine uncertainty forms a fundamental theoretical basis for the importance of new venture creation as a source of innovation-driven growth; entrepreneurs must establish and expand firms to capture the subjectively perceived profit opportunities. Therefore, tax policy is decisive for the commercialization and dissemination of innovations by providing incentives to uncertainty-bearing, not only for entrepreneurs, but also for intrapreneurs and financiers taking an active part in the governance and development of firms based on innovations characterized by genuine uncertainty. Furthermore, taxation can distort the evolutionary selection of innovations and firms, for instance, by taxing owners and firms differently. |
| Keywords: | creative destruction, economic growth, entrepreneur, entrepreneurship policy, innovation, judgment, Knightian uncertainty |
| JEL: | B40 O10 O30 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17577 |
| By: | Koski, Heli; Kuosmanen, Natalia; Kuusi, Tero |
| Abstract: | Abstract This brief presents key findings from Etla’s “Innovation-Driven Pathways to Economic Growth” project, which deepen the understanding of the mechanisms behind innovation-driven growth and evaluate the role of innovation policy in promoting sustainable growth in Finland. The findings underscore the critical role of foreign inventors and skilled employees in driving innovation and economic renewal. Immigration of highly skilled individuals enhances knowledge and diversity, boosting the effectiveness of innovation policy measures, such as R&D subsidies. Fully realizing this potential requires the effective integration of foreign experts into research and innovation activities. Supporting the green transition simultaneously presents Finland with significant opportunities to strengthen its competitiveness. While Finland’s share of green production currently lags behind international leaders, the country’s industrial structure and high-tech expertise provide a solid foundation for growth. Effectively targeted R&D subsidies can boost productivity and improve societal welfare. Targeting support for high-innovation-capacity companies can accelerate structural economic reforms. However, policymakers must consider adjustment costs, which can reduce the impact of growth policies. |
| Keywords: | Innovations, Immigration, Productivity, Economic growth |
| JEL: | D23 F22 J61 O3 |
| Date: | 2024–12–11 |
| URL: | https://d.repec.org/n?u=RePEc:rif:briefs:147 |
| By: | Hendriks, Patrick; Sturm, Timo; Mehler, Maren F.; Buxmann, Peter |
| Abstract: | Culture is fundamental to our society, shaping the traditions, ethics, and laws that guide people’s beliefs and behaviors. At the same time, culture is also shaped by people—it evolves as people interact and collectively select, modify, and transmit the beliefs they deem desirable. As artificial intelligence (AI) becomes more integrated into our lives, it plays an increasing role in how cultural beliefs are (re)shaped and promoted. Using a series of agent-based simulations, we analyze how different ways of integrating AI into society (e.g., national vs. global AI) impact cultural evolution, thereby shaping cultural diversity. We find that less globalized AI can help promote diversity in the short run, but risks eliminating diversity in the long run. This becomes more pronounced the less humans and AI are grounded in each other’s beliefs. Our findings help researchers revisit cultural evolution in the presence of AI and assist policymakers with AI governance. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:150816 |
| By: | Easaw, Joshy (Cardiff Business School); Sun, Yang (Cardiff Business School) |
| Abstract: | Recent studies show that significant historical events, particularly the slave trade, had an impact on contemporary African economies. The transmission mechanisms, however, are not well established. The purpose of the present paper is to consider two such transmission mechanisms, notably militarism and economic institutions. The present paper explores the impact of the historical slave trade, or exports, on institutions in two ways. Firstly, its impact on contemporary militarism as a political institution and, secondly, its impact on economic institutions, in particular property rights enforcement. The analysis uniquely shows the causal link between an important aspect of the historical slave trade, notably the import of military arms, and current African institutions. Finally, we also show that contemporary militarism, especially in the affected African economies, has a direct impact on their incomes. |
| Keywords: | African slave exports, militarism, property rights, institutions, average incomes |
| JEL: | N17 N47 O43 O55 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cdf:wpaper:2024/22 |