A Contribution to the Theory of Economic Growth
TL;DR: In this paper, a model of long run growth is proposed and examples of possible growth patterns are given. But the model does not consider the long run of the economy and does not take into account the characteristics of interest and wage rates.
Abstract: I. Introduction, 65. — II. A model of long-run growth, 66. — III. Possible growth patterns, 68. — IV. Examples, 73. — V. Behavior of interest and wage rates, 78. — VI. Extensions, 85. — VII. Qualifications, 91.
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TL;DR: The authors examined whether the Solow growth model is consistent with the international variation in the standard of living, and they showed that an augmented Solow model that includes accumulation of human as well as physical capital provides an excellent description of the cross-country data.
Abstract: 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
14,402 citations
Cites background from "A Contribution to the Theory of Eco..."
...Barro [1989] presents the argument succinctly: In neoclassical growth models with diminishing returns, such as Solow (1956), Cass (1965) and Koopmans (1965), a country's per capita growth rate tends to be inversely related to its starting level of income per person....
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TL;DR: In this paper, the authors show 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.
Abstract: 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.
12,469 citations
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TL;DR: In this paper, the authors show 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.
Abstract: 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.
11,095 citations
TL;DR: For 98 countries in the period 1960-1985, the growth rate of real per capita GDP is positively related to initial human capital (proxied by 1960 school-enrollment rates) and negatively related to the initial (1960) level as mentioned in this paper.
Abstract: For 98 countries in the period 1960–1985, the growth rate of real per capita GDP is positively related to initial human capital (proxied by 1960 school-enrollment rates) and negatively related to the initial (1960) level of real per capita GDP. Countries with higher human capital also have lower fertility rates and higher ratios of physical investment to GDP. Growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment. Growth rates are positively related to measures of political stability and inversely related to a proxy for market distortions.
9,420 citations
Posted Content•
TL;DR: This article extended these models to include tax- financed government services that affect production or utility, and showed that growth and saving rates fall with an increase in utility-type expenditures; the two rates rise initially with productive government expenditures but subsequently decline.
Abstract: One strand of endogenous-growth models assumes constant returns to a broad concept of capital. I extend these models to include tax- financed government services that affect production or utility. Growth and saving rates fall with an increase in utility-type expenditures; the two rates rise initially with productive government expenditures but subsequently decline. With an income tax, the decentralized choices of growth and saving are "too low," but if the production function is Cobb-Douglas, the optimizing government still satisfies a natural condition for productive efficiency. Empirical evidence across countries supports some of the hypotheses about government and growth.
5,497 citations
References
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01 Jan 1892
TL;DR: In this paper, the authors explore a hypothesis, based on acIcumulating evidence, regarding the character of inventions likely to issue from the research laboratories of the large industrial corporations.
Abstract: r 9HE purpose of this paper is to explore a hypothesis, based on acIcumulating evidence, regarding the character of inventions likely to issue from the research laboratories of the large industrial corporations. Simply put, this hypothesis may be stated as follows: with few exceptions, the large industrial laboratories are likely to be minor sources of major (radically new and commercially or militarily important) inventions; rather they are likely to be major sources of essentially "improvement" inventions. Put more precisely, the hypothesis states that the proportion of all minor inventions originating in the large industrial laboratories is likely to exceed the proportion of all major inventions originating in these laboratories. Note that the stress on the relative importance of these laboratories as sources of improvement inventions is not necessarily a denigration of the economic importance of this contribution. The cumulative effect of these improvement inventions may be, and often has been, of substantial importance over long periods of time for advancing technology, investment opportunities, and economic growth. The stress on improvement inventions as the principal product of the research laboratories of the large industrial corporations is meant simply to emphasize that, whatever the importance of their contributions, most of the latter is not likely to involve radically new inventive activity. I cannot claim originality for this hypothesis. After it suggested itself in the course of my investigations, I discovered that others, some of them in the most unlikely positions,2 had earlier said much the same thing. But, apart from occasional remarks, I can find no discussions attempting to explain or justify it. And because, if reasonably accurate, it has numerous ramifications, I have felt the need to set down an extended analysis of 1 I wish to thank members of the Seminar on Law and Technology, sponsored by the University of Wisconsin Law School under the auspices of the Ford Foundation, for their many helpful comments on this paper. Especially do I wish to thank Professors Jacob Schmookler, Robert Merrill, John Stedman, Harrison White, and John Heath. 2 See particularly the statement quoted below (p. 114) of D)r. Frank Jewett, former president of Bell Laboratories.
689 citations