Questions tagged [economic-growth]

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

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2answers
2k views

Relationship between interest rate and rental price of capital

In Daron Acemoglu's Introduction to Modern Economic Growth (2009), P.32, it is stated that given assumption of exponential depreciation at the rate $\delta$ and normalization of price of final good to ...
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1answer
373 views

Stability of steady-state equilibrium for overlapping generation model

From Daron Acemoglu's Introduction to Modern Economic Growth, proposition 9.4 is that: In the overlapping-generations model with two-period lived households, Cobb-Douglas technology and CRRA ...
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1answer
162 views

Can an overall improvement in technology make the owners of one factor worse off?

In a closed two-factor economy, suppose there is a biased technological improvement that increases the productivity of both factors, but one more than the other. Can this reduce the aggregate returns (...
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326 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 ...
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278 views

What are the relationships between price stability and long term economic growth?

I was wondering what the links are between price stability and economic growth on the long term.
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1answer
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How to prove that GDP grows at the same rate as consumption on Lab Equipment Model?

I'm studying the Lab Equipment Model (Barro-Sala-i-Martin, Chapter 6). I'm having trouble when trying to prove that every variables grows at the same rate as consumption. I was able to prove that $\...
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Books on Technological Progress and Growth

I've done some google search for good, reader friendly albeit technical, books on technological progress/change and economic growth. However, I've not found what I want. If you are using or have heard ...
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1answer
141 views

Dynamic Optimization : Resource Stock as a Sink

I think about a dynamic problem where social planner maximizes the following utility ; $$\underset{c\left(t\right)}{max}\int_{0}^{\infty}u\left(c\left(t\right)\right)e^{-\rho t}$$ subject to two ...
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1answer
60 views

Positive interaction term with one negative component?

Say I have an augmented growth regression, where my Y is GDP growth, and my Xs are the classical MRW variables, + international aid + corruption + the interaction term between the two. Basically, I'm ...
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69 views

Decreasing labor force and GDP

I'm a bachelor student writing a paper on the effects of China's one child policy on future GDP. My professor told me to use growth models. However, I'm unsure which growth model I need to use for ...
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4answers
610 views

In GDP growth studies, are factors of production measured as stock or flows?

Consider the following cases: One machine (capital) is used by multiple producers within one year. For instance, farmers renting tractors from the same company. In this case, in terms of GDP, there ...
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1answer
80 views

Growth regressions over 3-year periods; regressors in average or year values?

Say that I want to estimate a growth regression basically similar to the Augmented Solow Model one, except my dependent variable is not Y/L, but it's the average GDP growth over a 3-year period. As my ...
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Alpha interpretation in Solow growth model

Consider the Solow model (without technology): $Y = F(K, L) = K^\alpha L^{(1-\alpha)}$ What's the economic interpretation of $\alpha$? Prove and argue the result. I see it as a share that ...
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Steady state Solow model with exogenous technological change

Consider the following question: So, assume the standard function for production: $$Y_t = A_t K^\alpha_tL^{1-\alpha}$$ where $L$ is fixed. Then, the growth rate of output is: $$g_Y \approx g_A + ...
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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 ...
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How can a free market be operated in a way that significant social and environmental costs are intrinsically covered?

More precisely, is there any practical way to operate a free market so that external costs, namely negative social and environmental impacts, become naturally (intrinsically) covered (paid for or ...
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1answer
71 views

Term for rapid economic growth when starting over or in a new place

Please bear with me as I know little about general Economics, and I'm sure I am massively oversimplifying what I am trying to describe. I'm looking for a term to describe what happens when an economy ...
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What happens if money supply grows more slowly than inflation?

I'm thinking the case of Argentina. In 2016, prices raised about 40% but according to the central bank of Argentina, money supply grew only 30%. Is this going to have an effect in 2017? What could we ...
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6answers
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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?
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1answer
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How can a positive relationship between capital per effective worker and technological change be explained?

I'll get to the point: so, in the context of theories of long-run economic growth, I understand at a basic level that, in the Solow model, there is a negative relationship between capital per ...
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1answer
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What is a supply side shock in macroeconomics?

I was hoping someone could clarify what exactly is meant when someone refers to a country as having undergone a 'supply-side shock' and generally speaking when one is evaluating the health or growth ...
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1answer
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Growth and Development [closed]

Behavioural axiom in microeconomics explain a lots regarding why some countries lead and why some lag when it comes to growth and development? Please specify me the meaning of behavioural axiom here ...
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2answers
305 views

The United States' position on the Laffer Curve

According to a 2012 IGM panel (cf. reference below), most experts believe that a federal income tax cut would lead to a higher GDP in five years, ceteris paribus. Is this effect purely Keynesian, and ...
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356 views

Is population growth irrelevant with respect to per capita GDP growth

In Solow's growth model the growth rate of the output or GDP of a country is denoted by $g$. In the model this can be decomposed to $$ g = g_l + g_k, $$ where $g_l$ is the growth rate of the effective ...
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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....
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Calculating growth rate of capital when not in steady state

Given a Cobb-Douglas production function, the annual population growth rate, savings rate, alpha, annual depreciation rate, and annual technological progress rate, how would one calculate the growth ...
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1answer
108 views

Could Depreciation of Capital $=\delta(K(t))^{\theta}$ with $\theta<1$ Be a Realistic Assumption?

In the context of a long-term growth model with $K$ representing aggregate (man-made) capital, what theoretical or empirical reasons, if any, might be given for assuming that depreciation of capital $...
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1answer
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When should a company's revenue and share price grow faster or slower than the economy?

I was listening to a famous investor discuss an investment of his in an interview. He had bought shares in a bank that was quite successful, though it was a small bank. The bank is based in a highly ...
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1answer
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What are the different patterns/quantity of employment according to demands of different income ranges?

I don't really have that much knowledge on economics or anything, so perhaps that's something I'd find an answer if I just knew the adequate terminology. Rephrasing/explaining my question: different ...
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1answer
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Directed technical change, Acemoglu (2002) framework - trying to understand how an equation is derived

You may have read Acemoglu (2002) on the topic of directed technical change. I am reading a similar research paper, and I could not understand how the author derived the final equation using ...
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899 views

What Is the Economic Meaning of “Structural Reforms”

I see tweets like this a lot: Poor 2q growth shows its not just a "1q curse". Cannot ever cause eco recovery thru just #QE, low interest rates. #StructuralReforms They seem to be saying ...
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Why do the economic system freeze when the growth is null

When there is no growth, economy goes bad, unemployement increases, consumption decreases, even in a situation where population is not growing. Why ? We could imagine that without growth, the country ...
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1answer
928 views

Why goods prices are normalized in each period in growth models?

As it is known, in simple economic growth models such as the Solow or the Ramsey model, all goods prices are set equal to 1 in each period. Also, as we known from general equilibrium theory, ...
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Eric Reinert's conspiracy theory?

After read Eric Reinert's "How Rich Countries Got Rich ... and Why Poor Countries Stay Poor", I've got the question: Reinert theory is: Rich West countries are investing to advanced branches at ...
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6answers
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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 ...
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1answer
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Growth rate of variables on a balanced growth path (BGP)

Normally, in the very basic endogeneous model of growth. It is said that all variables grow at a constant rate. Let's take the basic capital accumulation ; $$\dot{K}=Y-C$$ If I write this in ...
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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 ...
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1answer
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Are there big waves of entrepreneurship over time?

In some models there are times when there are many entrepreneurs, and others when there are not. Is this a stylized fact of some kind? Are there any statistics about how entrepreneurial a particular ...
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1answer
147 views

In what sense is economic growth cumulative?

In my economics syllabus, one of the student competences is to "Show the cumulative nature of growth and measure average and annual rates of growth". What I don't understand is how a country's GDP ...
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1answer
175 views

Can a Discount Rate be Inferred within a Solow-Swan Growth Model?

I'm trying to understand the implications of a Solow-Swan growth model with, to keep things simple, constant population, and constant Cobb-Douglas technology written in per capita form as $y=k^{\alpha}...
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1answer
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Why do developing countries adopt 21st century technology, but stay behind in output per capita?

The economic growth rate of Latin America has been about 3% per year for decades; but if you have ever visited, many of the natives have: internet, smartphones, tomography, hybrid cars, etc. Why don'...
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1answer
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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 ...
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1answer
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Does the growth rate of a neoclassical production function converge as all input factors grow with constant, but different growth rates?

Suppose you have a neoclassical production function with N-inputs $F(x_t^1,...,x_t^N)$ All input factors grow in continuous time with constant, but not identical growth rates $g^j$. Assume $g^1 \leq ...
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What do economist state as evidence that “structural reform” works?

The typical recipe for countries to improve their growth rate and escape high indebtedness is to reduce expenditure and implement structural reform. What do people use as evidence of structural reform ...
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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 ...
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2answers
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What analysis has been done to predict the next big financial crash?

There has been a lot of talk about a big pending financial crash due to the slowing global economy, low interest rates, rising debt levels, etc. Now I'm wondering: Has anyone done any analysis to ...
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1answer
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Is global economic collapse inevitable? [duplicate]

The global economy depends on growth, but growth can never be indefinite in a finite world with limited space and resources. Moreover, growth always tends to decline over the long term due to the law ...
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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 ...
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Who really benefits from economic growth?

In recent social protests, I have heard the claim that the economic growth benefits only the rich: they become richer while most people become poorer. To check whether this claim is realistic, I ...
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427 views

Endogenous Growth: Balanced Growth Path with CRRA Utility

I've got a model of endogenous growth due to spillovers. $\textbf{Model:}$ $$K_t=\frac{1}{n}\sum_{t=1}^nk_t$$ In this model, $k_t$ is chosen by agents, and $K_t=\bar{k}_t$ (the average of all $k_t$). ...