Questions tagged [economic-growth]

An increase over time in the quantity of goods and services produced within an economy.

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36
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10answers
8k views

Why do we need to “get the economy moving again”?

Sorry I have no background in economics but as a computer programmer, I specialise in building models out of simple math and logic, so I hope we can speak the same language without having to get into ...
22
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2answers
3k views

Should we expect more structural technological unemployment if growth becomes more limited by natural resources and less by labour?

Technological unemployment, where unemployment arises from (with some oversimplification) workers being replaced by machines, has so far been temporary as new jobs were created that replaced the old ...
18
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5answers
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Why are real median household incomes stagnant?

This image shows US real median household income. It seems remarkable for its lack of growth over the last 20 years. This has been the subject of much political debate (around the "1%" and "occupy ...
18
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3answers
611 views

When Optimal Control fails (?)

In order to "ask my question", I have to solve a model first. I will omit some steps but still, this will unavoidably make this post very long -so this is also a test to see whether this community ...
16
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5answers
4k views

How do economies grow?

These days, we hear again and again about the so-called "need" for economic growth. But how do countries actually grow economically? That is, why/how does their GDP increase over time? ...
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2answers
4k views

Larry Summers on the causes of secular stagnation

In an influential speech on November 8, 2013 at the IMF Annual Research Conference, Larry Summers suggested that slow economic growth in the years following the 2007–2008 financial crisis might be due ...
11
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2answers
12k views

Solow Model: Steady State v Balanced Growth Path

Okay, so I'm having real problems distinguishing between the Steady State concept and the balanced growth path in this model: $$ Y = K^\beta (AL)^{1-\beta} $$ I have been asked to derive the steady ...
11
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2answers
1k views

Inflation and economic growth

Noticeable works about the impact of inflation on economic growth are dated back to the 90s. For example, Barro (1995): the impact effects from an increase in average inflation by 10 percentage ...
11
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1answer
412 views

Are there fundamental reasons why (exponential) economic growth is highly desirable?

One of the most widely published measures of the economy is the economic growth as a % of the GDP; i.e. the degree to which an economy grows exponentially. In my understanding, when the rate of ...
10
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4answers
4k views

Why is economic growth measured exponentially rather than linearly?

If economic growth is indeed highly desirable (see this question), why must this growth be exponential? With finite resources, exponential growth might hit limits rapidly (or be impossible?). Why not ...
10
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2answers
171 views

Schumpeterian Business Cycles

The basic idea of Schumpeterian Business Cycles is that new technologies require creative destruction but will yield positive growth. These two opposing forces have impacts onto the real economy at ...
9
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5answers
4k views

Can the stock market grow faster than GDP indefinitely?

My understanding of conventional wisdom is that average long-term growth of advanced economies is expected to be significantly lower than the average long-term growth of the value of the largest firms ...
9
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4answers
2k views

Macroeconomics for Mathematicians

I'm coming from a math background (so my mind is set up for Definitions-Observation-Lemma-Proof frameworks) and looking for recommendations of a Macroeconomics textbook mainly devoted to growth models ...
9
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2answers
1k views

Why does immigration boost the economy? (or does it not…?)

I'm a novice at macroeconomics, and trying to understand the effect of immigration (from developing nations) on the economy of a developed nation. Specifically, I am considering the effect when the ...
8
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2answers
9k views

Transversality Condition in neoclassical growth model

In the neo-classical growth model there is the following transversality condition: $$\lim_{t\rightarrow\infty}\beta^{t}u'(c_{t})k_{t+1}= 0,$$ where $k_{t+1}$ is the capital at period $t$. My ...
8
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2answers
449 views

Why some countries are wealthier than others?

Twin-peak of economic growth is one of the concepts discussed in economics. Most of explanations for poverty traps are baseed on the lack of infrastructures and public goods. How could be another main ...
8
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1answer
420 views

Is indefinite exponential economic growth possible?

Economic growth is frequently expressed as a % of GDP. Proponents of a steady-state economy postulate that perpetual exponential economic growth is impossible and that any system relying on it is ...
7
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5answers
3k views

Does Inflation Make Money Eventually Worthless?

I used this calculator: http://www.buyupside.com/calculators/inflationjan08.htm to estimate the future worth of 100 dollars in 100 years at 2% inflation. Does this really mean that a decent meal at a ...
7
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2answers
628 views

on economic growth and Second Welfare theorem

While I was studying eighth edition of Mankiw's Macroeconomics, in chapter 9 on Economic Growth(pg. 245), the author mentions : "Some economists have proposed increasing the incentive to save by ...
7
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1answer
102 views

Banking System, Canada & US

Why are the way banks are established and spread out in Canada and US so different? Canada: There are only six major banks and most products offered are very competitive. Its almost unusual to hear ...
7
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6answers
962 views

What is the relevance of economic growth?

Economic policies often mention high economic growth as a desirable path. For example, "We started to lay a new foundation for stronger, more durable economic growth." -- President Obama, ...
6
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2answers
89 views

What fraction of new businesses die out within a year?

Is there a simple way to figure out how many new businesses appear and disappear each year in the US economy? It seems a key question to figure out how the economy is changing over time, although I ...
6
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2answers
135 views

Predicted recessions that never happened

It seems generally accepted that recessions are hard to forecast, in both onset and intensity, but the bias seems to be toward rosy outlooks: The main finding is that, while forecasters are ...
6
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6answers
441 views

Reconciling low wages with high technology and high education

This is one example of many recent doom storied prognosticating that the "millennial" generation will be the first in (recent) history to experience lower incomes than their predecessors—at least in ...
6
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3answers
1k views

Understanding Tertiarization of the Economy

Trying to understand some of the core mechanics of tertiarization in developed economies. According to the WorldBank, "As incomes continue to rise, people’s needs become less “material” and they ...
6
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1answer
148 views

A recursive production function

I've been reading a book on a Kaleckian economics model, but there is a recursive function that has been bothering me. Can anyone provide some insight into why the equation why designed like this? ...
5
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2answers
60 views

Do patents foster innovation?

I'm looking for a good meta analysis which answers the question if patents are generally beneficial to economy or not. Some papers I've read claim they are indispensable, other say it depends on the ...
5
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2answers
123 views

How is the GDP growing when nothing else seems to be?

We've had strong GDP growth all three quarters this year. To me, that would indicate that, in at least some areas, we should be seeing growth. However, from my extremely ignorant armchair, it doesn't ...
5
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2answers
177 views

Why the total value of the whole economy is constantly appreciating?

Take S&P for example. In the long run it just keeps climbing. Same for the market as a whole. Why would this happen? Why the market keeps going up (in the long term) all the time? (source)
5
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1answer
152 views

How would gross world product look like if fossil fuel is treated as capital and not as income?

The idea to treat fossil fuel as capital is found in the first chapter of the book "Small is Beautiful: (A Study of) Economics as if People Mattered" (1973) by E. F. Schumacher. Is there recent ...
5
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2answers
142 views

What are some growth theories that are considered the most correct at the moment?

In under grad intermediate macro classes they often teach the Solow model. While intuitively it makes sense, it seems like it no longer is really taken seriously anymore (I could be wrong). From my ...
5
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1answer
56 views

A growth model with regime switch

I have a very general question. I am reading this paper : http://www.webmeets.com/files/papers/eaere/2015/177/Discounting-HelsinkiBlind.pdf There is a catastrophic event probability and after the ...
5
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1answer
624 views

Ok to normalize GDP change by population change?

Does it make sense to normalize change in real GDP by the contemporaneous change in population? I'm interested in this calculation for the following reason. Suppose real GDP increases. I'd like to ...
5
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2answers
174 views

Does trade lead to economic growth in the most basic models of trade?

In the standard models of trade, such as Ricardo or Hecksher-Ohlin, I know that openness to trade will lead to increased consumption as (roughly) the consumption possibility frontier expands beyond ...
5
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1answer
383 views

Has US real median personal/household income been stagnant since the late 1970's/early 1980's?

This is referring to an earlier question: Why are real median household incomes stagnant? How do the following graphs actually tell you that US real median personal/household income has been stagnant ...
5
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1answer
7k views

How is wealth created? [duplicate]

The production of 'goods and services' and 'innovation' is the usual answer. I feel that doesn't really answer the question. These things can be traded for wealth but they don't generate new wealth. ...
5
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1answer
2k views

Infinite Horizon Transversality Condition

This question is an extension of Endogenous Growth: Balanced Growth Path with CRRA Utility however, this question asks about a specific concept used in that question, and I think it would be helpful ...
5
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2answers
116 views

Is inequality increasing? Does it correspond to increasing social harm?

I have a series of related questions. My understanding is. Economic wealth (ie. GDP) per capita is increasing around the world. We can refer to this as 'the pie is getting bigger'. At the same ...
5
votes
2answers
87 views

Is a country in economic downturn if its growth rate is negative, but improving?

As I understand it, economic downturn means that economic growth is significantly slowing down or entering into recession. (If anyone wants to correct me, please do so). i.e. Growth rate is decreasing....
5
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1answer
91 views

The Next Breakthrough of Growth Economics

Romer has once said, that the growth economics has not had a breakthrough after his work of endogenous model of 1990's. What could somehow prove his saying is that we rarely see the theoretical ...
5
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1answer
58 views

In economic modelling, how are we sure the linearized equilibria behave similarly to original equilibria?

The following problem is in the context of continuous time, although I suspect something could be said about discrete time also. Let's assume that we have the following equation: $$\dot x=f(x)$$ ...
5
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4answers
373 views

How is money created?

This might seem like a really simple question, but I am really troubled by it on a macro scale. The money has to come from somewhere. Someone might start up a business that creates things or takes ...
5
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1answer
177 views

About intertemporal elasticity of substitution

The inter temporal elasticity of substitution between two periods of time is $$\sigma=-\frac{d[\ln(c(s)/c(t))]}{d[\ln(U'(c(s))/U'(c(t)))]}$$ I need to prove that $$\lim_{s \to t}\sigma = -\frac{U'(c(t)...
5
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1answer
304 views

Labour-saving vs. Labour-augmenting technical change

I've read a number of posts on the above topic but none refers to published empirical papers. Google searches have been hopeless. Does anyone know of any paper on empirical derivation of technical ...
5
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0answers
186 views

Consumption-Leisure Elasticity

The macro-literature insists on a consumption-leisure elasticity of 0 to match the balanced growth fact of constant labor supply. Is there any paper that tries to evaluate this elasticity using ...
5
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2answers
666 views

Growth theory / Initial GDP: positive coefficient sign

I estimated growth regressions for several EU countries. In each of them, the sign of "initial GDP"'s coefficient is statistically significant but positive, which contradicts growth theory as well as ...
5
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2answers
815 views

Neoclassical economic profit and growth theory versus marxian

Marxists have a very specific "profit" and "economic growth" theory. According to marxists, profit doesn't come from technology, whose cost will be reflected in the price of whatever commodity the ...
4
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6answers
4k views

Can an economy grow without its population growing?

Assuming natural resources are not a limiting factor, can a country's economy keep growing if the country's population is not growing? What about the global population?
4
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2answers
51 views

“If markets are competitive, the rate of return on capital equals its marginal product, $f'(k)$ minus depreciation $\delta$”?

Consider Solow model with $Y=(AL)^{1-a}K^a$. Then output per effective labor is $y=k^a$ where $k=\frac{K}{AL}$. "If markets are competitive, the rate of return on capital equals its marginal product,...
4
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1answer
236 views

Does everyone prosper through development projects?

Why don't all investors focus their intentions on development projects in less developed countries? Wouldn't this benefit all parties since the recipient country would be more developed and the ...

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