Endogenous Economic Growth Model Research Articles

Rent Seeking, Tax Policy, and Economic Growth

It is suggested a Romer-Barro - type model of endogenous economic growth where producers contest for distribution of a fixed share of the government’s tax revenue. The proportional contest mechanism is assumed. We studied conditions under which consumers gain or lose due to existence of the Rent seeking, tax policy, and economic growth (RS) opportunities. It is found that RS always decreases rate of growth but nevertheless may raise consumer’s overall utility. RS is advantageous if tax rate is too high or rate of production return is too low. The area of parameters, where RS has positive effect, is larger for more impatient consumers. We study also a static RS production model with heterogeneous producers and show that excessive tax burden creates incentives for RS (which is interpreted as corruption). It is argued that the producers’ support of corruption-free regimes depends on the marginal cost elasticity of the production technologies and may be reached due to technical progress. The results demonstrate that the connection, observed in a number of empirical papers, between economic development and RS may be two - way since it may be caused by factors that influence both RS and economic growth.

Accumulation of Foreign Exchange Reserves and Long Term Growth

Cross-country regressions, reported in this paper for 1960-99 period, seem to suggest that the accumulation of foreign exchange reserves (FER) contributes to economic growth of a developing economy by increasing both the investment/GDP ratio and capital productivity. We offer the following interpretation of these stylized facts: (1) FER accumulation causes real exchange rate (RER) undervaluation that is expansionary in the short run and may have long term effects, if such devaluations are carried out periodically and unexpectedly; (2) RER undervaluation allows to take full advantages of export externality and triggers export-led growth; (3) FER build up attracts foreign direct investment because it increases the credibility of the government of a recipient country and lowers the dollar price of real assets. A three-sector model of endogenous economic growth (including a consumer good sector, investment good sector and an export trade sector) is suggested to demonstrate how undervaluation may improve social welfare. Concepts of FER accumulation trajectories and equilibrium trajectories are introduced. It is demonstrated that small udervaluation of the equilibrium exchange rate may be wealth improving.

Environment, energy and sustainable economic growth

Sustainable energy utilization and environmental protection are important to sustainable economic growth. In this paper, we develop an endogenous economic growth model and discuss the optimal path of sustainable economic growth with the constraints of energy and environment. We find that sustainable economic growth can be achieved only when the relative contribution rate of environment protection investment to environmental quality is more than the relative contribution rate of combined input of energy and environment to production. The results indicate that long-run growth requires not only a continuous energy intensity decrease and technology progress in the fields of energy resources exploitation, exaction, refinement and utilization, but also an optimal structure adjustment from depending on nonrenewable energy to renewable energy.

How corruption affects economic growth in Nigeria

The World Bank (2010) asserts that corruption is the single greatest impediment to economic growth in third world countries. This paper investigated the impact of corruption on economic growth in Nigeria from 1986 to 2007. An endogenous economic growth model developed by Barro (1991) was modified and applied to the Nigerian case using a time series data on some critical variables in the Nigerian economy. The model was estimated using Engle and Granger's (1987) co-integration and error correction technique. Empirical findings partly overturn the view in the literature that corruption is a beneficial 'grease' that lubricates the engine of economic growth. Meaning, corruption decelerates economic growth in Nigeria. The paper recommends shortening of labyrinthine structure in general administration of government and quick dispensation of justice in order to stem corruption and promote economic growth in Nigeria.

Environmental Protection Investment and SustainableDevelopment-Policy Simulation Based on Nonlinear Dynamics

The sustainable development of resource and environment is the main content of the scientific concept of development and it has become a necessary condition for harmonious society. This paper builds an ecologicaleconomic system model containing natural capital by employing an endogenous economic growth model with natural capital and environmental protection investment, then analyzes the model's dynamic behavior and imitates the behavior. At the same time, this paper discusses how the economic output is imp acted by the proportion of investment allocation in economic system. The results show that the complexity of ecological-economic system makes a huge difference in the system behavior in the short and long term. Only in the conditions of the certain proportion of environmental protection investment allocation, can the whole economy –ecological system grow steadily in long-term stability and develop sustainably.

Demographic change in models of endogenous economic growth. A survey

While in exogenous growth models demographic variables are linked to economic prosperity mainly via the population size, the structure of the workforce, and the capital intensity of workers, endogenous growth models and their successors also allow for interrelationships between demographic variables and technological change. However, most of the existing literature considers only the interrelationships based on population size and its growth rate and does not explicitly account for population aging. The aim of this paper is (a) to review the role of population size and population growth in the most commonly used endogenous economic growth models, (b) discuss models that also allow for population aging, and (c) sketch out the policy implications of the most commonly used endogenous growth models and compare them to each other.

Fiscal policies, environmental pollution and economic growth

This paper develops a model of endogenous economic growth with special consideration to the role of productive public expenditure and environmental pollution; and analyses the properties of optimal fiscal policy in the steady state growth equilibrium. We consider the level of consumption as the source of pollution. Government allocates its tax revenue between pollution abatement expenditure and productive public expenditure. Optimum ratio of productive public expenditure to national income is equal to the competitive output share of the public input, when productive public expenditure is depicted as tax revenue minus abatement expenditure. However, the proportional income tax rate exceeds the competitive output share of the public input. There is no conflict between the social welfare maximizing solution and the growth rate maximizing solution in the steady state growth equilibrium. The unique steady state growth equilibrium appears to be a saddle-point when the growth rate is above a critical level and the steady state equilibrium growth rate in the market economy is not necessarily lower than the socially efficient growth rate.

On explosive dynamics in R&D-based models of endogenous growth

Several R&D-based models of endogenous economic growth are investigated under the Solow-like assumption of fixed allocation of resources across activities. We identify model parameters that lead to explosive dynamics and analyze various economic techniques to avoid it. The techniques include adding stricter constraints on model trajectories and limiting factors in technology equation. In particular, we demonstrate that our vintage version of the well-known R&D-based model of economic growth [C.I. Jones, R & D-based models of economic growth, J. Polit. Econom. 103 (1995) 759–784] exhibits the same balanced dynamics as the original model.

Fiscal Policy In Endogenous Economic Growth Models With Two R&d Sectors

This paper is intended to investigate the possibilities for government interventions based on fiscal policy measures in economies like those described in endogenous growth models with two R/D sectors.

Role of Education in Economic Growth in the Russian Federation and Ukraine

This study analyses the role and impact of education on economic growth in the two largest economies of the former Soviet Bloc, namely, the Russian Federation and Ukraine. It attempts to estimate the significance of different educational levels, including secondary and tertiary education, for initiating substantial economic growth that now takes place in these two countries. This study estimates the model of endogenous economic growth and the system of linear and log-linear equations that account for different time lags in the possible impact of higher education on economic growth. The model estimation shows that there is no significant impact of educational attainment on economic growth. The results from the system of equations indicate that an increase in access of population to higher education brings positive results for the per capita GDP growth in the long term. Increasing the number of college-educated specialists leads to sustainable economic growth. The suggestion can be made that the ground for the 2000-2007 rapid economic growth in Ukraine and in the Russian Federation was laid down in early 1990s. This contradicts commonly accepted perception about the crisis decade of 1990s in the former Soviet Bloc.

A model of optimal allocations of physical capital and human capital in three sectors

The paper develops an endogenous economic growth model about allcation of physical and human capital in three sectors. Optimal allocation of physical capital and human capital in three sectors is derived, the fraction of physical and human capital in each sector is positively related. The balanced values and the growth rates at steady state are given under certain conditions. Finally relations between the fractions of human capital and parameters are analyzed elaborately.

Special functions for the study of economic dynamics: The case of the Lucas-Uzawa model

The special functions are intensively used in mathematical physics to solve differential systems. We argue that they should be most useful in economic dynamics, notably in the assessment of the transition dynamics of endogenous economic growth models. We illustrate our argument on the famous Lucas-Uzawa model, which we solve by the means of Gaussian hypergeometric functions. We show how the use of Gaussian hypergeometric functions allows for an explicit representation of the equilibrium dynamics of all variables in level. The parameters of the involved hypergeometric functions are identified using the Pontryagin conditions arising from the underlying optimization problems. In contrast to the pre-existing approaches, our method is global and does not rely on dimension reduction.

Technological complexity and economic growth

Over the last fifty years there have been large secular increases in educational attainment and R&D intensity. The fact that these trends have not stimulated more rapid income growth has been a persistent puzzle for growth theorists. We construct a model of endogenous economic growth in which income growth, R&D intensity, and educational attainment depend on the complexity of new technologies. An increase in complexity that makes passive learning more difficult induces increases in R&D and education, alongside a decline in income growth. Our explanation also predicts a concurrent rise in the skill premium.

Stability, global dynamics and Markov equilibrium in models of endogenous economic growth

This paper studies the local and global dynamics of two-sector models of endogenous growth with economy-wide external effects and taxes on capital and labor. The local analysis classifies the parameter space depending on the number of stationary solutions and local stability of equilibria. The global analysis shows that if taxes are within certain bounds and the size of the external effects on the average level of human capital is smaller than the share of physical capital, the equilibrium path is monotone and therefore a continuous Markov equilibrium can be constructed.

Structure of equilibrium time-varying trajectories in the Lucas endogenous growth model

A family of time-varying equilibrium trajectories in the well-known Lucas endogenous economic growth model is studied. The equilibrium trajectories are shown to differ not only in level, but also in long-term growth rate under a certain combination of parameters.

Trade, Knowledge Spillover and Economic Growth - A Theoretical Implication from the Knowledge-driven Economic Growth Model –

This paper considers a broader concept of economic integration in order to analyze the impact of integration on economic growth within the context of the knowledge-driven endogenous economic growth model. The equilibrium growth rate derived from the model implies that while increasing the flow of ideas from integration speeds up the long-run rate of growth, impact of trade liberalization is complicated and not decisive. The overall impact of economic integration on • economic growth depends on various aspects of the economy which are related to its R&D investment such as knowledge spillovers, and industrial and market structures. The results of this paper suggest that policy makers need to consider international economic policy, market structure and industrial policy all at once, with special emphasis on the effect affirms' R&D activities when making decisions on economic integration.

Minimum Weighted Residual Methods in Endogeneous Growth Models

The paper deals with the application of Minimum Weighted Residual Methods (MWR) in intertemporal optimizing models of endogenous economic growth. In the 1st part of the paper the basics of the MWR method are described. Attention is mainly concentrated on one special class of MWR methods: the orthogonal collocation method with the Chebyshev polynomial basis. The second part of the paper is devoted to the setup of a model of endogenous growth with human capital accumulation and the government sector and to the derivation of 1st order conditions which form a Two-Point-Boundary-Value problem. A transformation of the problem which eliminates the growth in variables is then presented and the MWR method is used to solve the model for some policy experiments.

Human capital and returns to scale

Models of endogenous economic growth typically assume that aggregate production is characterised by increasing returns to scale, often as a result of the accumulation of physical and human capital. In this paper, an international data‐set on formal educational attainments is used to disaggregate total employment in order to estimate a Cobb‐Douglas aggregate production function. The function is estimated, using a pooled cross‐section time‐series model, for a selection of high income OECD countries for five years in the period 1960‐85. The estimation results suggest that increasing returns to scale prevailed.

Long-run determinant of Korean economic growth: empirical evidence from manufacturing

This paper challenges the recent contrarian view that the phenomenal growth of East Asian NICs is fuelled mainly by the accumulation of production inputs not by TFP growth. To appraise this view, we investigated and re-evaluated South Korean manufacturing growth (1973(Q1)–1993(Q4)). Using Johansen's cointegrating analysis, our results show that South Korean manufacturing appears to have increasing returns to scale in production technology. The ‘learning by doing’ effect defined by Lucas (1988) is empirically supported. This effect appears to be observed as a long-run determinant of South Korean manufacturing growth. Consequently, South Korean manufacturing growth can be described by an endogenous economic growth model, such as the Lucas (1988) model, contradicting the contrarian view.

The Effect of Cultural Values on Economic Development: Theory, Hypotheses, and Some Empirical Tests

Theory: Cultural variables are incorporated into a baseline endogenous economic growth model. Hypotheses: Cultural attitudes toward achievement and thrift have a positive effect on economic growth. Cultural attitudes concerning postmaterialism have a negative effect on economic growth. Methods: Ordinary least squares regression is used to test economic and cultural models of growth on a cross section of 25 countries. The encompassing principle is used to resolve competing theoretical specifications and to generate a final parsimonious model. A variant of Leamer's Extreme Bounds Analysis (EBA) is used to evaluate the sensitivity of parameter estimates. The conclusions are further supported by nonparametric methods including robust regression and bootstrap resampling. The data for the analysis are from the World Values Survey (1990) and from Levine and Renelt (1992). Results: An empirical model that incorporates both cultural and economic variables is superior to an explanation emphasizing one set of these variables. The final model is robust to: (1) alterations in the conditioning set of variables; (2) elimination of influential cases; and (3) variations in estimation procedures.