Questions tagged [economic-growth]

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

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69 views

Solow Model with a Capital Stock Externality

Suppose we have the following form of the Solow Model: $$ Y_t=K_t^{a+b} L_t^{1-a} $$ where a,b >0, and a+b<1. Is it possible to determine the steady state growth rate of k (k=K/L), and the steady ...
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Is a proft tax not distorting unless we know the opportunity cost?

A Profit tax where we actually know the Entire Cost Function Including the Opportunity cost(Time, Incommodation, best alternative for the easily monetized resources etc) is not distorting. But the ...
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The rationale for using a lagged variable to address endogeneity arising from simultaneous causation?

when there is simultaneous causation between dependent and independent variables often in papers we see a lagged variable being used in place of contemporaneous variable. For example, Clemens, ...
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If an endogenous explanatory variable is serially correlated does it mean that its lags are also endogenous?

in panel data when examining economic growth determinants lags are often used to account for endogeneity of explanatory variables. However if the explanatory variable is serially correlated, does it ...
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What is the interpration of results if adding or subtracting a control variable effects the significance of explanotary variables?

I am conducting some regressions on economic growth determinants and I am disillusioned. Essentially by choosing what groups of variable to regress I can get the desired significance. What does this ...
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What is the relationship between economic growth and equality?

Does economic growth create more or less equality?
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Is it reasonable, in panel data, to use past values of explanatory variables as instruments to deal with simultaneous causality?

I am trying to examine the determinants of economic growth, essentially regressing a number of variables upon economic growth. I face a problem that there is likely simultaneous causality between many ...
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Israel as an Asian Tiger

The Asian Tigers are Asian countries who underwent rapid industrialization and maintained exceptionally high growth rates in the second half of XX century. The question is: are there any objective ...
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1answer
48 views

Maximizing units under a budget constraint and increasing costs

Consider two columns. Column A has total cost per day, Column B has units bought that day. The marginal cost of each unit is increasing because of limited supply. My goal is to estimate total ...
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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 ...
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Has there been an applications of search and matching theory in the Neoclassical Growth Model?

Specifically, I am looking for the standard neoclassical growth model, but the labour decision is based on either search or matching theory instead of a Walrasian labour mechanism.
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What is low unemployment and low gdp growth symptomatic of?

Obviously there are caveats with GDP, if you build a bridge to nowhere it counts as GDP, but if you mow your own lawn or volunteer to pick up garbage it doesn't count, and so forth and so on. However, ...
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Typical Growth Model Social Planner Problem

Consider the following social planner's problem, hand-waving the usual assumptions on the preference, technology, endowment, and inelastic supply of labor: $V(k_o^*)= max_{\{c_t,k_{t+1}\}_{t=0}^{\...
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Growth Model Choices

In a typical macro growth model, a set-up usually concerns with the following trade-offs or choices to be made in each $t$: (1) $c_t$ v. $c_{t+1}$, consumption today versus tomorrow. (2) $c_t$ v. $1-...
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Beta convergence: data uncertainties

Maybe these questions are silly for many of you but I’m trying to conduct a beta convergence analysis using data from the Penn World Table, and I have run into some uncertainties. For the dependent ...
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1answer
444 views

If every company in the economy earns zero economic profit, can they contribute to real economic growth?

I understand that zero economic profit does not equal to zero accounting profit. It means that every resource that goes into the production is perfectly utilized considering alternative uses in the ...
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Is there any mainstream criticism of the Benes-Kumhof conclusion that the Chicago Plan would improve the US economy nowadays?

A 2012 IMF Working paper by Benes and Kumhof "The Chicago Plan Revisited " has this abstract, finding in favor of the Chicago Plan an all counts basically: At the height of the Great Depression a ...
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The economics of a “no deal” Brexit

A "no deal" Brexit is presented in negative terms. In such a scenario the UK would set tariff schedules in line with trade strategy and protect domestic industry/agriculture with tariff rate quotas. ...
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Are there any studies, academic papers or articles that defy “common” knowledge", i.e that patents give an incentive for R&D to private business?

In Economic Growth and particularly dynamic optimization. My professor taught us that an intertemporal allocation is a dynamic optimum(Pareto Optimum) only if(necessary condition) at any given ...
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Are there economic models that predict (only) a medium/long-term negative effect of protectionism?

Going by some ECB models/estimates from last year, protectionism would result in negative consequences pretty fast, e.g. For illustration, I will use the results of simulations carried out by ECB ...
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Does migration exacerbate (albeit delay) the problem of aging, economically-inactive populations in Western societies?

As a layman, I've always understood that there is a general consensus amongst economists that "immigration is economically beneficial" to rich Western countries (like Britain) who have aging ...
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How long did it take before the Hawley–Smoot Tariffs reached their peak effect on US growth?

I understand that this may still be a contentious issue, but are there some estimates how long it took before the Hawley–Smoot Tariffs impacted US growth significantly and/or how long it took for them ...
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What is the difference between a growth shock and a productivity shock

In a RBC context, what I mean by growth shock is a total factor productivity shock that follows a stochastic trend $ln(a_t) = ln(a_{t−1}) + \gamma + \epsilon^a_t$. I.e. the technology $a_t$, has a ...
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How exactly does removing labor​ market rigidities reduce structural unemployment and increase potential output in an economy?

Here I want to focus primarily on the potential benefits of labor market reforms such as a reduction in job security and trade union power and not their controversies. I wish to learn a few thoroughly ...
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1answer
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[Graduate Macro]Land in the Economic Growth Model: CES Function

I am an undergrad student trying to study grad macro. I have been trying to solve exercise problem in Barro's economic growth. The model is about adding land in the Ramsey Model. The model goes as ...
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The maximum sustainable yield model: clarifications

I would like your help to understand the Maximum sustainable yield model. This is what I understood with some questions. We consider a population of individuals who are born, possibly reproduce ...
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Different explanation for economic growth, depending on the length of the period considered

I'm being introduced to macroeconomics, and a colleague asked why do we say that in the short term the productivity of a country is determined by the "demand side" (IS/LM model) while in the long run ...
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Equity and increase in sales

I am reading this book shoe dog by phil knight. There is mention of equity in one of the pages where the banker says *Your rate of growth is too fast for your equity * It is very confusing. From ...
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Why is an inverted yield curve NOT a good predictor for recessions except in the US?

I am trying to better understand the mechanism (if there is one) behind an inverted yield curve predicting - or causing, as some would argue - a recession. In order to do that, I'm trying to ...
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Stock market's obsession with growth of all companies?

I understand the stock market is a useful place to gain capital which allows further growth of a company. But it seems to me that even companies that have been on the stock market a while, appear to ...
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What are some common causes of jobless growth?

While "jobless recovery" is often discussed in the aftermath of recessions in Western countries, it seems it's always a short-lived phenomenon. On the other hand, it looks like in other parts of the ...
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Global stability in a ramsey growth model with multiple equilibria

Let's say that we have a model with multiple equilibria. $c$ refers to consumption and $S$ refers to natural capital stock. The dynamics that describe the economy are as follows: $$\dot{S}\left(t\...
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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 ...
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Is weak global economy always a “headwind”?

In the most recent (Mar. 20, 2019) FOMC Press conference, Powell said this: So, global economy was a tailwind for the United States in 2017. That was the year of synchronized global growth, and ...
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Overlapping Generations model: Social Planner solution

Assume we have a model of OVG where there are 2 overlapping generations, youngs and olds, the agents are two period living. The utility function is logaritmic, and the production function is Cobb-...
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Here's a question about the solow model [closed]

At first, I was confused by how y keeps increasing after depreciation exceeds savings, then I finally found what was truly bothering me. The fact that when depreciation exceeds savings, capital per ...
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1answer
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Does brain drain really affect a nation's growth trajectory?

Take India as an example. India has been losing most of its bright minds to the west. India also ranks low in development. I would like to get a definitive answer to this cause-effect type question. ...
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The growth rate in the Solow model

Consider a very simple version of the Solow model with discrete time, a fixed population size and no technological progress (a fuller description of the assumptions is outlined here). Capital is at '...
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German economic growth in 20th century

I have question regarding this great animation: Animation: The World’s 10 Largest Economies by GDP (1960-Today) Why did Germany GDP shrink so much from 1995 to 2000, while US was still growing very ...
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How to Calculate the productivity multiplier?

Given a Cobb Douglas $Y_t = A (K_t^\alpha L_t^{1-\alpha}) $ $ K_{t+1} = sY_t + (1-\delta) K_t$ How do we get the multiplier on productivity to be equal to $ \frac{1}{1-\alpha}$? I understand ...
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Logs and percentage change in equation

Suppose I have the following relationship between output $y$, capital stock $k$ and total factor productivity $tfp$, $$\frac{\partial y}{\partial t}=\frac{\partial k}{\partial tfp}*\frac{\partial tfp}...
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Dot over a variable, Neoclassical growth model?

Looking at the Neoclassical growth model, I have hard time understanding what dot over a variable mean? I know it is short for taking the derivative with respect to time, I don't understand the ...
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Economic interpretation of a CES production function

I am following a paper where a production function of this type is used. $$Y=\left [\beta K^{- \rho}+\alpha \eta \left (\frac{K}{L} \right )^{-c(1+\rho)}L^{- \rho} \right ]^{-1/\rho}$$ It is a ...
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Positive effects of a Tunisia-EU free trade agreement?

Tunisia might be signing a free trade agreement with the EU very soon. It's called ALECA or DCFTA. Many activists and labor unions are opposing such an agreement because it would result in losing ...
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Best financial model to proportionally distribute the company's income to all employees?

I'm planning to start a project of something "innovative". And among some of the parts of the project that I'm thinking about, it's in the term of how money (profits) should be distributed. The truth ...
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1answer
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Why are we using exp(.) as the functional form in the household maximization problem inside the RCK model?

Currently I'm studying the RCK model at my Advanced Macroeconomics I classes. A question arose almost immediately when I saw the utility function of a household in this model. The question is: why ...
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annualized quarterly growth rate calculating

I was using R to calculate the annualized quarterly growth rate of real GDP by 400*diff(log(rgdp)). If I perform in this way some of the percentage change is big. However, if I calculate as 100*diff(...
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Wealth Creation: Where does the money come from?

I'm trying to better understand wealth creation– let's use trade as an example. I've bought a cup for \$2 and sold it for \$10. We've "created some new wealth" there– but without a net increase in ...
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The Effects of Demonetisation

I do not wish to get into the details of the Demonetisation implemented by the Indian Government on 8th November, 2016. Endless political debates have already been conducted advocating or berating ...
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falling household savings

While reading Mazzucato's "The value of everything", I come across this The rise in private debt in the US and UK has resulted in household savings falling as a percentage of disposable income - ...