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on Economic Growth |
| By: | Christian Bayer; Fabio Stohler |
| Abstract: | If households self‐select into a risky high‐income state through investment, increased government debt can stimulate investment and improve welfare. In a heterogeneous agent endogenous growth model, government debt helps households smooth consumption and encourages investment in risky, high‐return assets, crowding in aggregate growth. However, when debt becomes excessive, capital crowding out and distortionary taxation negate these benefits. Using a model calibrated to U.S. data, we show that this crowding‐in effect suggests a higher optimal debt‐to‐GDP ratio than currently observed. |
| Keywords: | Incomplete Markets, Public Debt, Endogenous Growth, Portfolio Choice |
| JEL: | D31 E21 G11 H63 O43 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_691 |
| By: | Takahashi, Yuta (Hitotsubashi University); Takayama, Naoki (Hitotsubashi University) |
| Abstract: | In the last two decades, economic growth has slowed down across developed countries. This paper investigates the role of technology specific to durable consumption and equipment goods in this global slowdown. We present evidence that technological stagnation in these sectors has prevailed globally over the past two decades. Using an extended Ramsey growth model as an accounting device, we find that this global technology stagnation can substantially account for the economic slowdown across developed countries through the capital deepening effect, rather than TFP. |
| Date: | 2025–06–12 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:ek5t6_v1 |
| By: | Alexis Litvine (University of Cambridge); Stanley Hinton (University of Cambridge) |
| Abstract: | This paper presents a subsectoral analysis of historical occupational data. The approach employs compositional data analysis and new metrics derived from properties of ternary plots, and it offers a more detailed and complex and dynamic image of the relationship between economic growth and structural change. As a result of this, it highlights a series of core sub-sectoral patterns, which were until now often overlooked by traditional sectoral analysis or invisible due to higher levels of data aggregation. We find that longer historical series confirm Rodrik’s pattern of ‘premature deindustrialisation’ (Rodrik 2016), including the rapid movement towards tertiary subsectors for later developers and the diminishing gender gaps in structural change. We develop a typology to identify which subsectors are most correlated to economic growth, and discuss what that may indicate in terms of theories of structural change. The empirical examination of economic development presented in this chapter will add historical depth to ongoing academic and policy-oriented discussions on the nature and contribution of structural changes to economic development. |
| JEL: | N33 O14 |
| Date: | 2024–07–03 |
| URL: | https://d.repec.org/n?u=RePEc:cmh:wpaper:36 |
| By: | Philippe Aghion; Timo Boppart; Michael Peters; Matthew Schwartzman; Fabrizio Zilibotti |
| Abstract: | We develop and quantify a novel growth theory in which economic activity endogenously shifts from material production to quality improvements. Consumers derive utility from goods with differing environmental footprints: necessities are material-intensive and polluting, while luxuries are more service-based and emit less. Innovation can be directed toward either material productivity or product~quality. Because demand for luxuries is more sensitive to quality, the economy gradually becomes “weightless”: growth is driven by quality improvements, services become the dominant employment sector, and material production stabilizes at a finite level. This structural transformation enables rising living standards with declining environmental intensity, providing an endogenous path to degrowth in material output without compromising economic progress. Policy can accelerate the transition, but its burden is uneven, falling more heavily on the poor than on the rich. |
| JEL: | E0 O41 O44 Q5 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33634 |
| By: | Yuki, Kazuhiro |
| Abstract: | Empirical studies suggest that income redistribution promotes economic growth and development by reducing inequality and increasing educational investment among the poor. However, the scale of redistribution is limited in many developing countries. Why is the scale of redistribution small? This paper examines the role of social identity, whose importance in redistribution and development is supported in existing empirical research. Under what conditions does national identity emerge, and how does it influence the economic outcomes? To answer the questions, this paper develops a dynamic model of income redistribution and educational investment augmented with social identification and explores the interaction among identity, redistribution, and development theoretically. Specifically, it examines how two key drivers of development---endogenous human capital accumulation and exogenous, increasingly skill-biased technological change---shape identity, redistribution, and development. |
| Keywords: | social identity, redistribution, economic development, national identity, nation-building policies |
| JEL: | D72 I38 O11 O20 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124755 |
| By: | Joshua S. Gans |
| Abstract: | Building on recent advances in the literature on knowledge creation and innovation (notably Carnehl and Schneider (2025), we propose a novel general equilibrium model that explicitly incorporates artificial intelligence (AI) as a decision-enhancing technology capable of interpolating between known points of knowledge. Our framework formalises the trade-off between AI’s coverage— its ability to span wider knowledge gaps—and its accuracy, and reveals the surprising result that, beyond producing immediate productivity gains, AI fundamentally alters the novelty of research. Specifically, when AI systems offer sufficiently broad coverage, they incentivise exploratory research that taps into novel, distant areas of knowledge and accelerates long-run growth; conversely, limited coverage promotes incremental research that may boost short-term efficiency while dampening the overall advancement of new ideas. Moreover, our analysis uncovers that the type of knowledge—whether novel or dense—plays a critical role in determining both the growth and welfare implications of AI, charting a new path for understanding how knowledge influences research strategies. By also examining the roles of market structure, licensing arrangements, and regulatory frameworks, our work contributes new, policy-relevant insights that reconcile the immediate benefits of AI adoption with the demands of sustainable long-term economic expansion. |
| JEL: | O30 O31 O40 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33907 |
| By: | Peter Persoon |
| Abstract: | Technological knowledge evolves not only through the generation of new ideas, but also through the reinterpretation of existing ones. Reinterpretations lead to changes in the classification of knowledge, that is, reclassification. This study investigates how reclassified inventions can serve as renewed sources of innovation, thereby accelerating technological progress. Drawing on patent data as a proxy for technological knowledge, I discuss two empirical patterns: (i) more recent patents are more likely to get reclassified and (ii) larger technological classes acquire proportionally more reclassified patents. Using these patterns, I develop a model that explains how reclassified inventions contribute to faster innovation. The predictions of the model are supported across all major technology domains, suggesting a strong link between reclassification and the pace of technological advancement. More generally, the model connects various, seemingly unrelated knowledge quantities, providing a basis for knowledge intrinsic explanations of growth patterns. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.08656 |