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on Economic Growth |
| By: | Yoseph Getachew; Richard Kima; Nyemwererai Matshaka |
| Abstract: | This paper develops a two-agent worker-capitalist heterogeneous household monetary Schumpeterian growth model to examine the effects of R&D and monetary policies on economic growth and inequality. The model is then calibrated to the South African economy, an upper-middle-income African country infamous for its consistently high level of inequality. A higher nominal interest rate reduces innovation and economic growth but help to mitigate inequality. However, the reduction in consumption inequality comes from a disproportionate decline in the capitalists' condition. |
| Keywords: | Economic growth, Inequality, Monetary policy, Research (Technological innovations) |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-55 |
| By: | M. O. Aibinu; K. J. Duffy; S. Moyo |
| Abstract: | The Solow-Swan equation is a cornerstone in the development of modern economic growth theory and continues to attract significant scholarly attention. This study incorporates memory effects into the classical Solow-Swan model by introducing a formulation based on the Caputo fractional derivative. A comparative analysis is conducted between the integer-order and fractional-order versions of the model to examine the influence of fractional dynamics on capital accumulation. The findings reveal that the inclusion of a fractional-order derivative significantly affects the trajectory and long-term stability of capital, offering a more flexible and comprehensive framework for modeling economic growth processes. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.20100 |
| By: | Kurniady, Alvin |
| Abstract: | This paper develops a theory of growth with self-learning AI. I decompose “technologies” into a non-self-learning component T(t) and a recursive self-learning term (S(t) D(t)) (t), where (t) = 0 + log(S(t) D(t)) links capability gains to deployed self-learning technologies S and data D. I present two complementary production functions. Version 1 highlights distributional channels by separating AI-complementary vs. AI-substitutable labor and human capital. Version 2 is measurement-oriented, mapping the self-learning stock to AI-specific physical capital, labor forces, and human capital, thereby operationalizing S. The model yields sharp regime conditions: with small/approximately constant (t), the economy exhibits a balanced growth path (BGP); when θ(t) becomes large enough to push effective returns above one, growth accelerates. A log-space recursion implies a quadratic bound for log((SD) (t)), establishing no finite-time singularity. The framework produces testable predictions—notably the need for both linear and quadratic terms in log(SD) in empirical specifications—and clarifies bottlenecks: insufficient AI-specific capital or low-quality data can hold down θ(t) and prevent acceleration even with advanced systems. Policy implications follow directly: scale compute and energy, raise HAI, LAI, and improve data governance/quality. The contribution is conceptual and theory-only, positioning the mechanism for subsequent empirical work while providing a tractable structure for cross-country comparisons in an economy increasingly driven by recursive, autonomous innovation. |
| Keywords: | Self-learning artificial intelligence Economic growth theory Recursive learning dynamics AI-specific capital and labor Balanced growth path vs. accelerating growth Cross-country growth models |
| JEL: | O41 |
| Date: | 2025–09–04 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126057 |
| By: | Philippe Aghion; Antonin Bergeaud; Timo Boppart; Peter J. Klenow; Huiyu Li |
| Abstract: | Firm price-cost markups may reflect (a) bigger step sizes from quality innovations that confer significant knowledge spillovers onto other firms, and/or (b) higher process efficiency than competing firms or other factors which bear no obvious knowledge externality. We write down an endogenous growth model with innovation step size and process efficiency as alternative sources of markup heterogeneity. Compared with the laissez-faire equilibrium, the social planner wants to reallocate research towards high step size firms but not high process efficiency firms. We then use price and productivity data across firms in French manufacturing to infer firm step sizes and process efficiency. We find that the planner could achieve faster growth by reallocating research toward high step size firms, and more so if high step size firms could freely license their innovations to high process efficiency firms. |
| JEL: | O31 O38 O41 O52 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34190 |
| By: | Gries, Thomas (University of Paderborn); Naudé, Wim (RWTH Aachen University) |
| Abstract: | We present a model of economic growth that bridges Green Growth and Degrowth perspectives. The model demonstrates that a minimum physical per capita consumption level can be maintained without recourse to tech-optimism, and moreover with degrowth in material resource throughput - respecting planetary boundaries. We critically discuss the assumptions necessary for this result, explore relaxing these, and illustrate that eventually a full transition to renewable energy and materials will be needed to sustain consumption levels in a post-growth economy. We identify areas for future growth modelling, emphasising that these require genuine interdisciplinary cooperation. |
| Keywords: | post-growth, degrowth, economic growth, green growth, sustainability |
| JEL: | O44 Q32 Q56 Q55 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18110 |
| By: | Nicholas A. Carollo; Elior Cohen; Jingyi Huang |
| Abstract: | Using novel occupational data from the United States between 1860 and 1940, we evaluate Adam Smith’s core propositions regarding the division of labor, market size, innovation, and productivity. We document significant growth in occupational diversity during this period using new measures of labor specialization that we construct from workers’ self-reported job titles in the decennial census. Consistent with Smith’s hypotheses, we find strong empirical evidence that labor specialization increases with the extent of the market, is facilitated by technological innovation, and is ultimately associated with higher manufacturing productivity. Our findings also extend Smith’s narrative by highlighting the role of organizational changes and innovation spillovers during the Second Industrial Revolution. These results speak to the enduring relevance of Smith’s insights in the context of an industrializing economy characterized by large firms, complex organizational structures, and rapid technological change. |
| Keywords: | division of labor; occupations; productivity growth; technological change |
| JEL: | N11 O14 J24 D24 |
| Date: | 2025–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedkrw:101725 |
| By: | Tomohiro Hirano; Joseph E. Stiglitz |
| Abstract: | This paper examines the simplest OLG models with capital accumulation, demonstrating three results that stand in marked contrast to those of the standard model: first, the possibility of multiple steady states; second, the possibility of multiple momentary equilibria under rational expectations; third, one of implications of multiple momentary equilibria is that dynamics may be marked by complex fluctuations (lacking even periodicity), but still within well-defined bounds. We provide quite general conditions (with general utility and production functions) under which in the simplest of OLG models, there can be multiple steady states, multiple momentary equilibria, and complex dynamics. Furthermore, we present a simple illustration of wobbly growth by incorporating credit friction. |
| JEL: | C61 E32 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34193 |