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Creator: Laitner, John Series: Productivity and the industrial revolution Abstract:
This paper presents a model in which a country's average propensity to save tends to rise endogenously over time. The paper uses a two-sector neoclassical framework to model the transition from agriculture to manufacturing which typically accompanies economic development. Key assumptions are that only the agricultural sector uses land and a simple version of Engel's law. When a country's income per capita is low, agricultural consumption is important; consequently, land is valuable and capital gains on it may account for most wealth accumulation, making the NIPA APS appear low. If exogenous technological progress raises incomes over time, Engel's law shifts demand to manufactured goods. Then land's importance in portfolios relative to reproducible capital diminishes and the measured average propensity to save can rise.
Palabra clave: Growth, Manufacturing, and Economic growth Tema: O41 - One, Two, and Multisector Growth Models and O14 - Economic development - Industrialization ; Manufacturing and service industries ; Choice of technology
Creator: Rivera-Batiz, Luis and Romer, Paul Michael, 1955- Series: Modeling North American economic integration Abstract:
In a world with two similar, developed economies, economic integration can cause a permanent increase in the worldwide rate of growth. Starting from a position of isolations, closer integration can be achieved by increasing trade in goods or by increasing flows of ideas. We consider two models with different specifications of the research and development sector that is the source of growth. Either form of integration can increase the long-run rate of growth if it encourages the worldwide exploitation of increasing returns to scale in the research and development sector.
Tema: F15 - Economic Integration, F43 - Economic Growth of Open Economies, and O41 - One, Two, and Multisector Growth Models
Creator: Atkeson, Andrew and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 256 Abstract:
We show that in a dynamic Heckscher-Ohlin model the timing of a country’s development relative to the rest of the world affects the path of the country’s development. A country that begins the development process later than most of the rest of the world—a late-bloomer—ends up with a permanently lower level of income than the early-blooming countries that developed earlier. This is true even though the late-bloomer has the same preferences, technology, and initial capital stock that the early-bloomers had when they started the process of development. This result stands in stark contrast to that of the standard one-sector growth model in which identical countries converge to a unique steady state, regardless of when they start to develop.
Palabra clave: Convergence Trade and Growth and Two Sector Growth Models Tema: O11 - Macroeconomic Analyses of Economic Development, F11 - Neoclassical Models of Trade, and O41 - One, Two, and Multisector Growth Models
Creator: Bajona, Claustre and Kehoe, Timothy Jerome, 1953- Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 378 Abstract:
In models in which convergence in income levels across closed countries is driven by faster accumulation of a productive factor in the poorer countries, opening these countries to trade can stop convergence and even cause divergence. We make this point using a dynamic Heckscher-Ohlin model — a combination of a static two-good, two-factor Heckscher-Ohlin trade model and a two-sector growth model — with infinitely lived consumers where international borrowing and lending are not permitted. We obtain two main results: First, countries that differ only in their initial endowments of capital per worker may converge or diverge in income levels over time, depending on the elasticity of substitution between traded goods. Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa. Second, factor price equalization in a given period does not imply factor price equalization in future periods.
Palabra clave: International trade, Economic growth, Convergence, and Heckscher–Ohlin Tema: F11 - Neoclassical Models of Trade, O15 - Economic Development: Human Resources; Human Development; Income Distribution; Migration, F43 - Economic Growth of Open Economies, and O41 - One, Two, and Multisector Growth Models
Creator: Boldrin, Michele and Levine, David K. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 279 Abstract:
Market booms are often followed by dramatic falls. To explain this requires an asymmetry in the underlying shocks. A straightforward model of technological progress generates asymmetries that are also the source of growth cycles. Assuming a representative consumer, we show that the stock market generally rises, punctuated by occasional dramatic falls. With high risk aversion, bad news causes dramatic increases in prices. Bad news does not correspond to a contraction of existing production possibilities, but to a slowdown in their rate of expansion. This economy provides a model of endogenous growth cycles in which recoveries and recessions are dictated by the adoption of innovations.
Palabra clave: Growth Cycles, Stock Market Value, and Technological Revolutions Tema: O30 - Innovation; Research and Development; Technological Change; Intellectual Property Rights: General, O40 - Economic Growth and Aggregate Productivity: General, G12 - Asset Pricing; Trading Volume; Bond Interest Rates, and O41 - One, Two, and Multisector Growth Models
Creator: Kahn, James A. (James Allan) and Lim, Jong-Soo Series: Conference on economics and politics Abstract:
This paper analyzes the political economy of growth as an issue of intergenerational distribution. The first part of the paper develops a model of endogenous growth via human capital accumulation in an overlapping generations setting. Equilibrium growth is inefficient due to the presence of an intergenerational externality. We characterize the set of Pareto efficient paths for physical and human capital accumulation, and find that there is a continuum of efficient growth rate-interest rate combinations. The preferred combination for an infinitely-lived planner will depend on the social discount rate. Competitive equilibrium with subsidized or mandated human capital accumulation may give rise to a Pareto efficient steady state, though for some parameters efficiency requires some intergenerational redistribution. We then argue that a social planner or government with an infinite horizon is incongruous in an OG model when the agents all have finite horizons. Hence the second part of the paper addresses the question of how a government whose decisionmakers reflect the finite horizons of their constituents would choose policies that affect physical and human capital accumulation. Specifically we assume that each government maximizes a weighted sum of utilities of those currently alive. Each period the government selects a policy that takes into account the effect (through state variables) on subsequent policy decisions (and hence on the welfare of the current young generation). Numerical methods involving polynomial approximations are used to compute equilibria under specific parametric assumptions. Equilibrium growth rates turn out to be substantially below efficient rates.
Palabra clave: Education, Growth, Political economy, Political instability, and Markov equilibrium Tema: D72 - Analysis of collective decision-making - Models of political processes : Rent-seeking, elections, legislatures, and voting behavior, O41 - One, Two, and Multisector Growth Models, and D91 - Intertemporal choice and growth - Intertemporal consumer choice ; Life cycle models and saving
Creator: Coleman, Wilbur John Series: Nonlinear rational expectations modeling group Abstract:
A cash-in-advance constraint on consumption is incorporated into a standard model of consumption and capital accumulation. Monetary policy consists of lump-sum cash transfers. Methods are developed for establishing the existence and uniqueness of an equilibrium. and for explicitly constructing this equilibrium. The model economy's dependence on monetary policy is explored.
Also published in the International Finance Discussion Paper series, number 323.
Palabra clave: Planned Growth economy, Monetary Growth economy, and Equilibrium Tema: O42 - Economic growth and aggregate productivity - Monetary growth models, E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation, O41 - One, Two, and Multisector Growth Models, and E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy
Creator: Chang, Roberto Series: Conference on economics and politics Abstract:
This paper examines the determination of the rate of growth in an economy in which two political parties, each representing a different social class, negotiate the magnitude and allocation of taxes. Taxes may increase growth if they finance public services, but reduce growth when used to redistribute income between classes. The different social classes have different preferences about growth and redistribution. The resulting conflict is resolved through the tax negotiations between the political parties. I use the model to obtain empirical predictions and policy lessons about the relationship between economic growth and income inequality. In particular, I show that, although differences in growth rates across countries may be negatively related to income inequality, redistributing wealth does not enhance growth.
Tema: D72 - Analysis of collective decision-making - Models of political processes : Rent-seeking, elections, legislatures, and voting behavior and O41 - One, Two, and Multisector Growth Models
Creator: Backus, David, Kehoe, Patrick J., and Kehoe, Timothy Jerome, 1953- Series: Modeling North American economic integration Abstract:
We look for the scale effects on growth predicted by some theories of trade and growth based on dynamic returns to scale at the national or industry level. The increasing returns can arise from learning by doing, investment in human capital, research and development, or development of new products. We find some evidence of a relation between growth rates and the measures of scale implied by the learning by doing theory, especially total manufacturing. With respect to human capital, there is some evidence of a relation between growth rates and per capita measures of inputs into the human capital accumulation process, but little evidence of a relation with the scale of inputs. There is also little evidence that growth rates are related to measures of inputs into R&D. We find, however, that growth rates are related to measures of intra-industry trade, particularly when we control for scale of industry.
Palabra clave: External effects, Intra-industry trade, Specialization indexes, Increasing returns to scale, Learning by doing, Research and development, Human capital, and International trade Tema: F43 - Economic Growth of Open Economies and O41 - One, Two, and Multisector Growth Models
Creator: Chari, V. V. and Hopenhayn, Hugo Andres Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 375 Abstract:
This paper develops a model of vintage human capital in which each technology requires vintage specific skills. We examine the properties of a stationary equilibrium for our economy. The stationary equilibrium is characterized by an endogenous distribution of skilled workers across vintages. The distribution is shown to be single peaked and, under general conditions, there is a lag between the time when a technology appears and the peak of it's usage, a phenomenon known as diffusion. An increase in the rate of exogenous technological change shifts the distribution of human capital to more recent vintages thereby increasing the diffusion rate.
Palabra clave: Technology, Skills, Innovation, and Workers Tema: O41 - One, Two, and Multisector Growth Models, O31 - Innovation and Invention: Processes and Incentives, and J24 - Human Capital; Skills; Occupational Choice; Labor Productivity