http://individual.utoronto.ca/zheli/sa1.pdf

On the mechanics of economic development

This paper examines whether the Solow growth model is consistent with the international variation in the standard of living. It shows that an augmented Solow model that includes accumulation of human as well as physical capital provides an excellent description of the cross-country data. The paper also examines the implications of the Solow model for convergence in standards of living, that is, for whether poor countries tend to grow faster than rich countries. The evidence indicates that, holding population growth and capital accumulation constant, countries converge at about the rate the augmented Solow model predicts. This paper takes Robert Solow seriously. In his classic 1956 article Solow proposed that we begin the study of economic growth by assuming a standard neoclassical production function with decreasing returns to capital. Taking the rates of saving and population growth as exogenous, he showed that these two vari- ables determine the steady-state level of income per capita. Be- cause saving and population growth rates vary across countries, different countries reach different steady states. Solow's model gives simple testable predictions about how these variables influ- ence the steady-state level of income. The higher the rate of saving, the richer the country. The higher the rate of population growth, the poorer the country. This paper argues that the predictions of the Solow model are, to a first approximation, consistent with the evidence. Examining recently available data for a large set of countries, we find that saving and population growth affect income in the directions that Solow predicted. Moreover, more than half of the cross-country variation in income per capita can be explained by these two variables alone. Yet all is not right for the Solow model. Although the model correctly predicts the directions of the effects of saving and

/pdf/a-contribution-to-the-empirics-of-economic-growth-27cl5gkqam.pdf

A Contribution to the Empirics of Economic Growth

Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a nonrival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.

/pdf/endogenous-technological-change-4yzdlw043b.pdf

Endogenous Technological Change

Existing strategies for econometric analysis related to macroeconomics are subject to a number of serious objections, some recently formulated, some old. These objections are summarized in this paper, and it is argued that taken together they make it unlikely that macroeconomic models are in fact over identified, as the existing statistical theory usually assumes. The implications of this conclusion are explored, and an example of econometric work in a non-standard style, taking account of the objections to the standard style, is presented. THE STUDY OF THE BUSINESS cycle, fluctuations in aggregate measures of economic activity and prices over periods from one to ten years or so, constitutes or motivates a large part of what we call macroeconomics. Most economists would agree that there are many macroeconomic variables whose cyclical fluctuations are of interest, and would agree further that fluctuations in these series are interrelated. It would seem to follow almost tautologically that statistical models involving large numbers of macroeconomic variables ought to be the arena within which macroeconomic theories confront reality and thereby each other. Instead, though large-scale statistical macroeconomic models exist and are by some criteria successful, a deep vein of skepticism about the value of these models runs through that part of the economics profession not actively engaged in constructing or using them. It is still rare for empirical research in macroeconomics to be planned and executed within the framework of one of the large models. In this lecture I intend to discuss some aspects of this situation, attempting both to offer some explanations and to suggest some means for improvement. I will argue that the style in which their builders construct claims for a connection between these models and reality-the style in which "identification" is achieved for these models-is inappropriate, to the point at which claims for identification in these models cannot be taken seriously. This is a venerable assertion; and there are some good old reasons for believing it;2 but there are also some reasons which have been more recently put forth. After developing the conclusion that the identification claimed for existing large-scale models is incredible, I will discuss what ought to be done in consequence. The line of argument is: large-scale models do perform useful forecasting and policy-analysis functions despite their incredible identification; the restrictions imposed in the usual style of identification are neither essential to constructing a model which can perform these functions nor innocuous; an alternative style of identification is available and practical. Finally we will look at some empirical work based on an alternative style of macroeconometrics. A six-variable dynamic system is estimated without using 1 Research for this paper was supported by NSF Grant Soc-76-02482. Lars Hansen executed the computations. The paper has benefited from comments by many people, especially Thomas J. Sargent

/pdf/macroeconomics-and-reality-3v6kkpl8jz.pdf

Macroeconomics and reality

Growth in this model is driven by technological change that arises from intentional investment decisions made by profit maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a nonrival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported, and instead, the equilibriumis one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.

https://papers.ssrn.com/sol3/Delivery.cfm/nber_w3210.pdf?abstractid=226703&mirid=1

В статье демонстрируется, что в ситуации отсутствия реализуемой ex post взаимозаменяемости между трудом и капиталом неоклассические теоремы производства продолжают выполняться.

Substitution and Fixed Proportions in the Theory of Capital

These days macroeconomics has become more respectable than it used to be. I can remember when many economists liked to say: Microeconomics is not problematic, but I just don’t understand macroeconomics. There was a definite implication that something must be wrong with macroeconomics, not with the observer. Of course macroeconomics cannot be “exact;” it has to work by rough analogy and empirical compromise. Maybe a certain raffishness is inevitable. Most economists work on microeconomic problems, with increasing use of new microeconomic data. But now it is widely understood that macroeconomics is at the heart of economics; it will not do to be snooty about it. This centrality will continue, for the best possible reason: the need to understand current events, especially unfavorable ones, and to formulate policies— even benign neglect is a policy—to

https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.14.1.151

Toward a Macroeconomics of the Medium Run

Money, inflation and growth

Preface Part I. Economic Rhetoric: Introduction and Comments: 1. Economics in the human conversation Arjo Klamer and Donald N. McCloskey 2. Comments from outside economics Stanley Fish 3. Comments from inside economics Robert M. Solow 4. Rhetoric and ideology Robert L. Heilbroner Part II. Economic Rhetoric: Further Arguments: 5. Marxian theory and the rhetorics of economics Stephen Resnick and Richard Wolff 6. Economic rhetoric: the social and historical context A. W. Coats 7. The ideas of economists Robert W. Clower 8. Should a scientist abstain from metaphor? Christina Bicchieri Part III. Economic Rhetoric Among Economists: 9. Shall I compare thee to a Minkowski-Ricardo-Leontief-Metzler matrix of the Mosak-Hicks type? Or, rhetoric, mathematics, and the nature of neoclassical economic theory Philip Mirowski 10. On the brittleness of the orange equilibrium E. Roy Weintraub 11. The significance of significance: rhetorical aspects of statistical hypothesis testing in economics Frank T. Denton 12. The rhetoric of self-interest: ideology of gender in economic theory Nancy Folbre and Heidi Hartmann Part IV. Economic Rhetoric in Politics and Journalism: 13. The heterogeneity of the economists' discourse: philosopher, priest, and hired gun Craufurd D. Goodwin 14. The grammar of political economy James K. Galbraith 15. The rhetoric of economics as viewed by a student of politics Robert O. Keohane 16. 'Yellow rain' and 'supply-side economics': some rhetoric that failed David Warsh Part V. Economic Rhetoric: Its Rhetoric and its Consequences: 17. Negotiating a new conversation about economics Arjo Klamer 18. The consequences of rhetoric Donald N. McCloskey Appendix Index.

The Consequences of Economic Rhetoric

This paper analyzes the impact of business cycle fluctuations on a labor market segmented into a unionized primary sector and a "competitive" secondary sector. Either permanent or temporary changes in real aggregate demand are shown to widen the intersectoral wage differential in recession and, under reasonable specifications of key parameters, to cause greater fluctuations of primary-sector employment than secondary-sector employment. This pattern agrees with the stylized facts of the U. S. economy.

Robert M. Solow

Papers

Substitution and Fixed Proportions in the Theory of Capital

Toward a Macroeconomics of the Medium Run

Money, inflation and growth

The Consequences of Economic Rhetoric

Wages and Employment in a Segmented Labor Market