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Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous.

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Presentation on theme: "Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous."— Presentation transcript:

1 Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT International Trade & the World Economy; Charles van Marrewijk

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3 Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT International Trade & the World Economy; Charles van Marrewijk

4 Introduction International Trade & the World Economy; Charles van Marrewijk Paul Romer ( )

5 Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT International Trade & the World Economy; Charles van Marrewijk

6 Modeling new goods International Trade & the World Economy; Charles van Marrewijk The variety approach

7 Modeling new goods International Trade & the World Economy; Charles van Marrewijk The quality approach

8 Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT International Trade & the World Economy; Charles van Marrewijk

9 Kaldor's stylized facts of economic growth International Trade & the World Economy; Charles van Marrewijk Nicholas Kaldor (1961) suggested the following list of stylized facts: The continued growth in the aggregate volume of production and in the productivity of labor at a steady trend rate. A continued increase in the amount of capital per worker. A steady rate of profit on capital. Steady capital-output ratios over long periods. A steady investment coefficient, and a steady share of profits and wages.

10 Kaldor's stylized facts of economic growth International Trade & the World Economy; Charles van Marrewijk

11 Kaldor's stylized facts of economic growth International Trade & the World Economy; Charles van Marrewijk

12 Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT International Trade & the World Economy; Charles van Marrewijk

13 The neo-classical model and the Solow residual International Trade & the World Economy; Charles van Marrewijk

14 The neo-classical model and the Solow residual International Trade & the World Economy; Charles van Marrewijk

15 Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT International Trade & the World Economy; Charles van Marrewijk

16 Empirical pictures International Trade & the World Economy; Charles van Marrewijk

17 Empirical pictures International Trade & the World Economy; Charles van Marrewijk

18 Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT International Trade & the World Economy; Charles van Marrewijk

19 Endogenous growth International Trade & the World Economy; Charles van Marrewijk Paul Romers (1994) list of stylized facts: There are many firms in a market economy. Discoveries differ from other inputs in that many people can use them at the same time (nonrival goods). It is possible to replicate physical activities. Technological advance comes from things that people do. Many individuals and firms have market power and earn monopoly rents on discoveries.

20 Endogenous growth International Trade & the World Economy; Charles van Marrewijk Production function: Operating profit for manufactures producer Future profits discounted; profits erode if number of varieties increases Inventing new variety represents fixed cost; with knowledge spillovers economy steadily grows forever; growth rate higher if: the labor force is higher (increasing returns to scale ensure that size is important) the fixed costs of investment F are lower, and the discount rate is lower.

21 Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT International Trade & the World Economy; Charles van Marrewijk

22 An experiment in geographical economics International Trade & the World Economy; Charles van Marrewijk Experiment w. 12 city racetrack; Herfindahl = measure of agglomeration

23 An experiment in geographical economics International Trade & the World Economy; Charles van Marrewijk

24 Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT International Trade & the World Economy; Charles van Marrewijk

25 Conclusions International Trade & the World Economy; Charles van Marrewijk Rising per capita income is relatively new phenomenon. Some countries have experienced relatively steady growth, others long periods of stagnation and rapid increases. Neo-classical model based on capital accumulation needs exogenous technological change to explain growth; large Solow residual. Endogenous growth models based on imperfect competition and innovation (new goods and/or quality improvements) led by entrepreneurs in search of profits. Large swings in economic prosperity may be explained by geographical economics model.


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