The welfare cost of monopolistic competition: a quantitative assessment

This paper quantifies the welfare cost of monopolistic competition in a simple parametric class of endogenous growth models, embedding the neoclassical growth framework as a special case. We put particular emphasis on taking transitional dynamics into account. In doing so, we develop an original two-step numerical procedure to compute the value function. We find for conservative calibrations that the welfare cost of monopolistic competition can be anywhere between 0.4 and 1.2% of consumption, depending on whether labor is elastically or inelastically supplied.     

Endogenous growth, welfare and budgetary regimes

Within an optimizing endogenous growth model with productive public capital and government debt, we derive and characterize on the balanced growth path a set of welfare-maximizing fiscal rules under different budgetary regimes. It is shown that optimal fiscal policy depends on the specific budgetary stance considered.     

Intergenerational welfare effects of a tariff under monopolistic competition

A dynamic overlapping-generations model of a semi-small open economy with monopolistic competition in the goods market is constructed. A tariff increase reduces real output and employment and improves the terms of trade, both in the impact period and in the new steady state. The tariff shock has significant intergenerational distribution effects which are different for creditor and debtor nations. Bond policy neutralizes the intergenerational inequities and allows the computation of first-best and second-best optimal tariff rates. The first-best tariff exploits national market power, but the second-best tariff contains a correction to account for the existence of a potentially suboptimal product subsidy.     

Export,FDI and the welfare gains from trade liberalization

This paper extends Melitz and Redding (2015) to analyze the welfare gains from trade liberalization by adding foreign direct investment(FDI). Our model predicts that with FDI activities, welfare gains from trade liberalization will be strictly lower than those in a model without FDI, but only takes exports into account. In addition, the calibrated model indicates that with FDI activities, aggregate welfare reaches its maximum when the fixed export costs are positive rather than 0. Furthermore, we decompose the welfare gains induced by trade liberalization from continuing exporters, and switchers. The results show that in any case, with or without FDI, continuing exporters contribute a larger share to welfare gains than status switching firms.     

Public debt and welfare in a quantitative Schumpeterian growth model with incomplete markets

This paper quantifies the welfare effects of counterfactual public debt policies using an endogenous growth model with incomplete markets. The economy features public debt, Schumpeterian growth, infinitely-lived agents, uninsurable income risk, and discount factor heterogeneity. Two versions of the model are specified, one with households holding equity in the group of innovating firms. The model is calibrated to the U.S. economy to match the degree of wealth inequality, the share of R&D expenditure in GDP, the firms’ exit rate, the average growth rate, and other standard long-run targets. When comparing balanced growth paths, I find large welfare gains in equilibria characterized by governments accumulating public wealth. The result is robust to the mechanism used to generate a highly concentrated wealth (i.e., preference heterogeneity or “superstar” income shocks). Welfare effects decompositions show that level effects and growth effects reinforce each other. The responses of both the intermediate goods and their market conditions are key in explaining the large level effects. The version of the model without equity is computationally easier to solve, allowing to consider transitional dynamics. Taking into account the dynamic adjustment to the new long-run equilibrium, I show that the transitional welfare costs are not large enough to change the sign of the welfare effects stemming from a change in public debt. I find that eliminating public debt would lead to a 0.8% increase in welfare, while moving to a debt/GDP ratio of 100% would entail a welfare loss of 0.5%. A decomposition analysis shows that growth accounts for approximately 50% of the overall welfare effects.     

Quality heterogeneity and global economic growth

This paper develops a fully endogenous, variety-expansion growth model with firm-specific quality heterogeneity, limit pricing, and an endogenous distribution of markups. Firms with high-quality products engage in exporting, firms with intermediate-quality products serve the domestic market, and inefficient firms with low-quality products exit the market. Trade liberalization, measured by a reduction in trade costs or a decline in foreign market entry costs, generates a reallocation of resources from low-quality to high-quality products and exit of inefficient firms. However, it has ambiguous effects on the average global quality level, long-run growth, and welfare. An increase in the rate of population growth or in the intensity of trade-related knowledge spillovers accelerates economic growth. The laissez-faire equilibrium is inefficient, and this leaves room for welfare-improving government intervention.     

On the effects of human capital and R&D policies in an endogenous growth model

We introduce an external effect of existing technologies in human capital accumulation in an endogenous growth model and describe its steady-state and transition. We numerically solve the model to compare the quantitative effects of R&D policy with the quantitative effects of human capital policy in wealth and welfare. Although R&D subsidies have now an overall positive effect on growth, wealth and welfare, the calibration exercise shows that for plausible values for the parameters, human capital policy is simultaneously the most income and welfare-improving and the less expensive to the government.     

Knightian uncertainty and poverty trap in a model of economic growth

This paper explores how Knightian uncertainty affects dynamic properties in an economic growth model. The decision-making theory employed in the analysis is the theory of expected utility under a non-additive probability measure, i.e., the Choquet expected utility model of preference. We apply this decision-making theory to an overlapping generations model where producers face “uncertainty” in their technologies. When the producer is averse to uncertainty, the firm's profit function may not be differentiable. Therefore, the firm's decision to invest and hire labor becomes rigid for a certain measurable range of real interest rates. In dynamic equilibrium, the existence of firm-level rigidity causes discontinuity in the wage function; this makes multiple equilibria the more likely outcomes under the log utility and Cobb–Douglas production functions. In this paper, we show that even if aversion to uncertainty is small, the “poverty trap” can arise for a wide range of parameter values.     

Trade policies, concentration, growth and welfare

The aim of this paper is to analyse, through a theoretical model, the effects that the trade integration of two countries may have on industrial location, growth and welfare.The conclusions reached finally depend both on whether the import or the export costs are affected by the trade policies on which the integration process is based and on whether the rich or the poor country introduces them. In general, when integration leads to an increase of industrial concentration in the rich country, the growth rate increases and welfare improves in both countries. If integration means that industry moves to the poor country, the growth rate decreases; in spite of this, in this case the poor country can also improve its welfare.     

Growth and welfare effects of stabilizing innovation cycles

We consider a simple model of innovation where equilibrium cycles may arise and show that, whenever actual capital accumulation falls below its balanced growth path, subsidizing innovators by taxing consumers has stabilizing effects, promotes sustained growth and increases welfare. Further, if the steady state is unstable under laissez faire, the introduction of the subsidy can make the steady state stable. Such a policy has beneficial effects as it fosters output growth along the transitional adjustment path, and increases the welfare of current and future generations.     

Pollution,abatement and balanced growth

The analysis of endogenous growth models with pollution often concentrates on steady state trajectories, under the assumption that the steady state is in some sense stable. In the present note we provide examples showing that this issue should be dealt with carefully. We use the Rebelo Ak model augmented with a stock of pollutants causing a negative externality. It is found that optimal growth is not necessarily balanced (contrary to the outcome of the standard Rebelo model). Moreover, the existence of the externality may affect long run optimal growth rates.The author is grateful to an anonymous referee for comments. All remaining errors are the author's sole responsibility.     

A North–South model of outsourcing and growth

In this paper, I formulate a simple North–South R&D‐based growth model where final goods firms in the North endogenously determine the range of international outsourcing of intermediate goods to the South. I show that a fall in the trade cost (through trade liberalization) of intermediate goods in the North: (i) reduces the wage of the North relative to that of the South; (ii) increases the outsourced variety of intermediate goods in the North; and (iii) stimulates Northern R&D activity and economic growth in both countries. By conducting welfare analysis, I also show that a decline in the trade cost of intermediate goods in the North improves welfare in the South more than in the North.     

Reliving the 1950s: the big push, poverty traps, and takeoffs in economic development

The classic narrative of economic development—poor countries are caught in poverty traps, out of which they need a Big Push involving increased investment, leading to a takeoff in per capita income—has been very influential in foreign aid debates since the 1950s. This was the original justification for foreign aid. The narrative lost credibility for a while but has made a big comeback in the new millennium. Once again it is invoked as a rationale for large foreign aid programs. This paper applies very simple tests to the various elements of the narrative. Evidence to support the narrative is scarce. Poverty traps in the sense of zero growth for low-income countries are rejected by the data in the whole period 1950–2001 and for most sub-periods. The poorest quintile also does not have significant negative growth of the relative income ratio to the world’s richest country over 1950–2001, nor is relative growth for the lowest quintile significantly different than other quintiles. The claim that “well-governed poor nations” are caught in poverty traps is rejected by simple regressions that control for both initial income and quality of government (instrumenting for the latter). The idea of the takeoff also does not garner much support in the data. Takeoffs are rare in the data, most plausibly limited to the Asian success stories. Even then, the takeoffs are not associated with aid, investment, or education spending as the standard narrative would imply.     

Efficiency, depth and growth: Quantitative implications of finance and growth theory

We develop a parsimonious finance and endogenous growth model with microeconomic frictions in entrepreneurship and a role for credit constraints. We demonstrate that though an efficiency–growth relation will always exist, the efficiency–depth–growth relation may not. This has implications for the connection between the theory and empirics of finance and growth. We go on to ask whether the model can account for some historical trends in growth, financial depth and financial efficiency for the UK over the period 1850–1913. The best model of finance and growth is one that departs from the standard depth–growth link.     

服务业产业内贸易与中国服务贸易的国际竞争力初探

产业内贸易在某种程度上是发展中国家技术水平和经济增长的标志，其发展水平也是衡量一国外贸竞争力的标志。我国服务业产业内贸易水平低下，国际竞争力不强。切实采取措施，提高产业内贸易发展水平是提升服务业产业内贸易国际竞争力水平的重要手段。     

经济增长与中拉贸易合作

近年来，中国和拉关地区的贸易额迅速增长。本文介绍了中拉贸易现状及贸易基础，重点对经济增长和中拉贸易合作之间的关系进行了分析。     

Money and growth in a cash-in-advance economy with costly credit

This paper develops a stochastic growth model with a cash-in-advance constraint, costly credit, and intermediary services. We study how the behavior of financial intermediaries affects the relationship between economic growth and the monetary system. We show that the payment that intermediaries charge for providing financial services influences the money–growth relationship. When the intermediation cost increases proportionally with credit purchases, we do not observe any influence of growth on the monetary system. When the intermediation cost is not proportional to credit purchases, growth is responsible for a transformation of the monetary system, i.e. money is relatively driven out of the economy as the economy grows.     

Trade liberalization, foreign ownership, and the environment in a small open economy

This paper examines the effects of trade liberalization on firm ownership and the environment for a small open economy. It is found that trade liberalization via tariff reductions can result in a dramatic switch in firm ownership from domestic to foreign, coupled with a lower pollution tax.     

Non-convex aggregate technology and optimal economic growth

This paper examines a model of optimal growth where the aggregation of two separate well behaved and concave production technologies exhibits a basic non-convexity. First, we consider the case of strictly concave utility function: when the discount rate is either low enough or high enough, there will be one steady state toward which the convergence of the optimal path is monotone and asymptotic. When the discount rate is in some intermediate range, we will find sufficient conditions for having either one equilibrium or multiple equilibria steady state. Depending to whether the initial capital per capita is located with respect to a critical value, we show that the optimal paths monotonically converge to one single appropriate equilibrium steady state. Second, we consider the case of linear utility and provide sufficient conditions to have either unique or two steady states when the discount rate is in some intermediate range. In this range, we give conditions under which the above critical value might not exist, and the economy attains one steady state in finite time, then stays at the other steady state afterward. P. Michel passed away when this research was completed. This paper is dedicated to his memory as a friend and colleague. N. M. Hung and C. Le Van thank the referee for vey helpful remarks and criticisms. They are grateful to Takashi Kamihigashi for very fruitful discussions. They also thank J.-F. Leclerc for editing the final version of this paper.