Social status,human capital formation and the long-run effects of money

This study examines the effects of monetary policy in a two-sector cash-in-advance economy of human capital accumulation. Agents concern about their social status represented by the relative physical capital and relative human capital. We find that if the desire for social status depends only on relative physical capital, money is superneutral in the growth-rate sense. However, if the desire for social status depends on relative human capital, the money growth rate will have a positive effect on the long-run economic growth rate. Furthermore, an increase in the desire to pursue human capital will raise the long-run growth rate, but an increase in the desire to pursue physical capital will lower it.     

Relative Wealth, Consumption Taxation, and Economic Growth

This paper examines the role of the relative wealth-induced status motive in affecting the neutrality of consumption taxation in an optimizing growth model. It is found that a key factor determining the validity of the neutrality of consumption taxation in both the level sense and the growth rate sense is the desire for relative wealth-induced social status. When individuals care about their relative wealth, a rise in consumption tax enhances the steady-state level of capital stock and consumption. Furthermore, if the production function takes a linear technology form as the engine of sustained growth, then increases in consumption taxation raise the economy's long-run growth rate. In addition, an optimal consumption tax policy provides full subsidies to consumption so as to induce the economy to achieve the social optimum and the optimal growth rate.     

Optimum Growth and Carbon Policies with Lags in the Climate System

We study the optimal carbon tax in an economy in which climate change, stemming from polluting non-renewable resource, affects the economy’s growth potential. Our main contribution is to introduce and explore the natural time lag of the climate system between emissions and damages to capital accumulation in an endogenous growth setting. This allows us to investigate how optimal climate policy, and its interplay with climate dynamics, affect long-run growth and the transition of the economy towards it. Without pollution decay, a higher speed of emissions diffusion steepens the growth profile of the economy. With pollution decay, this leads to lower short-run but higher long-run economic growth during transition. Poor understanding of the emissions diffusion process leads to suboptimal carbon taxes, resource extraction and growth.     

Social status, human capital formation and super-neutrality in a two-sector monetary economy

In this paper, we study how social status affects the impact of monetary policy on the long-run growth rate in a two-sector monetary economy with human capital accumulation, and find that the super-neutrality of money, with regard to the growth rate of the economy depends on the formation of human capital. In an economy with Lucas-type human capital formation, money is super-neutral; however, for an economy in which both physical and human capital are used as inputs for human capital accumulation, the money growth rate will have a positive effect on the long-run economic growth rate. The existence, uniqueness and saddle-path stability of balanced-growth equilibrium are also examined.     

Environmental Quality,Public Debt and Economic Development

This article analyzes the consequences on capital accumulation and environmental quality of environmental policies financed by public debt. A public sector of pollution abatement is financed by a tax or by public debt. We show that if the initial capital stock is high enough, the economy monotonically converges to a long-run steady state. On the contrary, when the initial capital stock is low, the economy is relegated to an environmental poverty trap. We also explore the implications of public policies on the trap and on the long-run stable steady state. In particular, we find that government should decrease debt and increase pollution abatement to promote capital accumulation and environmental quality at the stable long-run steady state. Finally, a welfare analysis shows that there exists a level of public debt that allows a long run steady state to be optimal.     

Polluting Non-Renewable Resources and Growth

In an endogenous growth model with human capital accumulation, we introduce non-renewable resources which cause flow pollution problems. In this set-up the negative external effect of pollution on productivity does not cause any distortions in the economy: The market economy will achieve the optimal extraction and growth rates. Consequently, emission taxes are unnecessary and, when introduced, will have no effect on the economy. The more important is the negative pollution externality, the larger will be the optimal long-run growth rate (which may be either positive or negative). In the case of a positive human capital externality, consumption in the market economy may approach zero in the long run, although positive consumption growth is socially optimal. Growth-enhancing policies do not necessarily cause a larger drain in the resource stock.     

Optimal fertility along the life cycle

We explore the optimal fertility timing in a four-period OLG economy with physical capital, whose specificity is to include not one, but two reproduction periods. It is shown that, for a given total fertility rate, the economy exhibits quite different dynamics, depending on the timing of births. If all births take place in the late reproduction period, there exists no stable stationary equilibrium and the economy exhibits cyclical dynamics due to labor growth fluctuations. We characterize the long-run social optimum and show that optimal consumptions and capital depend on the optimal cohort growth factor, so that there is no one-to-one substitutability between early and late fertility. We also extend Samuelson’s Serendipity Theorem to our economy and study the robustness of our results to: (1) endogenizing fertility timing, (2) assuming rational anticipations about factor prices, (3) adding a third reproduction period.     

Foreign Aid Reduces Labor Supply and Capital Accumulation

In an optimal growth model with foreign aid, foreign borrowing, and endogenous leisure-and-consumption choices, it is shown that a permanent rise in foreign aid reduces long-run capital accumulation and labor supply, increases long-run consumption, and has no effect on long-run foreign borrowing.     

空间经济视角下的外资依赖与中国经济增长

外资依存度偏高是我国经济增长的重要特征.以往的研究多基于主流增长理论从技术进步的角度考察FDI对经济增长的影响,因而难以得到全面的结论.本文从开放经济视角出发构建空间增长模型,讨论了外资依赖对经济增长产生的影响.本文认为,外资依存度的提高会因收入漏出效应导致东道国经济增长偏离最优路径,但FDI的技术溢出可在一定程度上抵消这一不利影响.要准确判断影响的方向,就需要在了解外资依存度增加原因的基础上对两种效应进行权衡.     

International Financial Liberalization, Corruption, and Economic Growth

This paper examines the effects of capital account liberalization on the long-run growth of a developing economy. A general-equilibrium, endogenous growth model is constructed in which corruption forms an integral part of the governance system of the country. By undermining the profitability of innovations, corruption lowers the rate of return to capital and reduces the rate of technological change. The impact of international financial liberalization on long-run growth in this model can be either positive or negative. A drop in growth is obtained when the level of corruption is high enough to cause domestic rates of return to capital before liberalization to drop below those in the rest of the world. In this case, liberalization generates capital outflows, which act as a constraining force on innovation, reducing the rate of technological change and lowering output growth. On the other hand, if the level of corruption is sufficiently low, the capital account liberalization will serve as a boost to the country's technical change and growth.     

Reconsidering the Impact of the Environment on Long-run Growth when Pollution Influences Health and Agents have a Finite-lifetime

Using an overlapping generation model à la Blanchard (1985, J Polit Econ 93:223–247) with human capital accumulation, we demonstrate that the influence of the environment on optimal growth in the long-run may be explained by the detrimental effect of pollution on life expectancy. We also show that, in such a case, greener preferences are growth- and welfare-improving in the long-run even if the ability of the agents to learn is independent of pollution and utility is additively separable. Finally, we establish that a minimum environmental policy is required to obtain a sustainable equilibrium in the market economy and that it is possible to implement a win–win environmental policy.     

Credit constraints,growth and inequality dynamics

This paper examines how credit constraints affect the dynamics of wealth and thereby the dynamics of capital and output growth. We develop standard Ak growth models that display transitional dynamics, contrary to general belief, once the complete credit markets assumption is relaxed. The mechanism is that credit constraints make individual productivity differences persist, which in turn leads to the persistence of income inequality. The dynamics of inequality is jointly determined with the dynamics of aggregate capital. The economy thus passes through a transitional period of inequality, individual and aggregate capital dynamics before it converges to a long-run balanced growth path. The application of the model to the analysis of intergenerational mobility and inequality dynamics suggests substantial economic and policy significance. In particular, introducing credit constraints to the Barro Ak model, public investment could have an indirect impact on growth via its effect on inequality and mobility.     

Uncertainty in the public debt market and stochastic long-run growth

In a continuous time model, a representative household has to allocate its investment and consumption in an optimal manner under conditions of uncertainty. In the present study it is hypothesized that there are two types of assets: a risk-free and a risky asset. The risk-free asset is assumed to be the physical capital, while at the same time uncertainty is allowed to result from the exogenous random variations in the public debt market, rendering in this way government bonds to act as the risky asset. In the endogenous growth framework with productive public investment, the expected long-run growth rate, the dynamic path of consumption as well as the optimal allocation of investment between a risky and a riskless asset, are analytically derived. This kind of treatment allows us to create a locus for the long-run growth over the various levels of uncertainty. The outcome of the analysis is that a rise in uncertainty impacts negatively upon the long-run growth rate. In order to empirically assess the relationship between growth and uncertainty, we lay our emphasis on the US economy for the period 1957:1 to 2008:4. Within the framework of a bivariate BEKK–GARCH(1,1)-M model a significant negative relationship between uncertainty and economic growth has been established.     

Investment Cycles and Sovereign Debt Overhang

We characterize optimal taxation of foreign capital and optimal sovereign debt policy in a small open economy where the government cannot commit to policy, seeks to insure a risk-averse domestic constituency, and is more impatient than the market. Optimal policy generates long-run cycles in both sovereign debt and foreign direct investment in an environment in which the first best capital stock is a constant. The expected tax on capital endogenously varies with the state of the economy, and investment is distorted by more in recessions than in booms, amplifying the effect of shocks. The government's lack of commitment induces a negative correlation between investment and the stock of government debt, a "debt overhang" effect. Debt relief is never Pareto improving and cannot affect the long-run level of investment. Furthermore, restricting the government to a balanced budget can eliminate the cyclical distortion of investment.     

The trade-off between environmental care and long-term growth—Pollution in three prototype growth models

The effects of increased environmental care on optimal technology choice and long-term growth are studied for an economy in which pollution is a side-product of physical capital used in production. First, it is shown that in case of a standard neoclassical production structure, the result is a less capital-intensive production process whereas the long-run growth rate is not affected. Next, we introduce assumptions of the endogenous growth literature. When there are constant returns to physical capital, an increase in abatement activities crowds out investment and lowers the endogenous growth rate. When human capital accumulation is the engine of growth, physical capital intensity declines and the endogenous optimal growth rate is unaffected by increased environmental care or is even higher, depending on whether or not pollution influences agents' ability to learn.The authors are grateful to an anonymous referee, to Lans Bovenberg, Noud Gruijters, Theo van de Klundert, Lex Meijdam, and Sweder van Wijnbergen for helpful and stimulating comments. The views expressed in this paper are the authors' own and should not be attributed to the Ministry of Finance.     

Fiscal policy,government debt,and economic growth in the Kaleckian model of growth and distribution

This article presents the Kaleckian model of growth and distribution that sets a budget deficit ratio as an indicator of fiscal policy and examines the short- and long-run effects of an increase in budget deficits and a rise in income tax rates on the economy. The key short-run outcomes are as follows. First, expanded budget deficits have a positive effect on the rate of capacity utilization. Second, the tax rate for wage income does not affect the rate of capacity utilization, whereas the tax rate for capital income has a favorable impact on it. This result implies that raising the tax rate for capital income can be an important policy instrument for stimulating the economy. Third, we find that the economy exhibits a wage-led aggregate demand in the short run. The main long-run results are as follows. First, the effect of expanded budget deficits on the growth rate is ambiguous, since a higher debt burden negatively influences the rate of capacity utilization and hence economic growth, despite the increase in demand caused by government borrowing. A higher budget deficit ratio thus raises the growth rate only if a certain condition is satisfied. Second, the tax rate for capital income has a positive impact on the growth rate. Third, the economy shows a wage-led growth in the long run.     

Long-Run Effects of Monetary Expansion in a Two-Sector Model of Endogenous Growth

This paper explores the long-run effects of monetary expansion by introducing a cash-in-advance constraint into one of the basic models of endogenous growth. In our model, the real side of the economy consists of two production sectors, one of which produces a final good that can be used either for consumption or for investment and the other produces new human capital. Both sectors use physical and human capital under constant returns to scale technologies. We first characterize the balanced-growth equilibrium and then examine how a rise in money growth affects the relevant variables, such as the long-term growth rate and the relative prices.     

The Long-run Trade Pattern in a Growing Economy

We analyze the determinants of the trade pattern in a two-country growing economy. The long-run trade pattern depends on the structure of the absolute advantage as well as the comparative advantage, because the absolute advantage determines the terms of trade and the value of the marginal product of capital which affect the growth rate in our model. Moreover, we find that opening trade reduces or removes the difference in the growth rates of the two countries when the country lagging in the growth rate has a comparative advantage in a consumption commodity. Received June 18, 2001; revised version received July 16, 2002 Published online: April 30, 2003     

政府公共资本投资的长期经济增长效应

本文首先建立一个包含政府公共资本投资的两部门内生增长模型,并把公共资本投资分为政府物质资本投资和人力资本投资,从而对公共资本投资的长期经济增长效应进行理论分析。结论是,两种形式的公共资本投资对长期经济增长都可能具有正效应也可能具有负效应,取决于民间经济主体消费跨时替代弹性大小。其次,我们利用向量自回归分析框架,对我国1978—2004年间公共资本投资对长期经济增长的影响作实证分析。结论是,我国两种形式的公共资本投资与经济增长之间存在着长期均衡关系,其中政府公共物质资本投资对长期经济增长的正影响更为显著,而政府公共人力资本投资对长期经济增长的正影响较小,且在短期内不利于经济增长。这一结论对我国今后科学制定财政政策和选择公共投资领域都具有重要意义。     

On the level of optimal capital import in a decentralized competitive economy

In a competitive economy, capital import will affect the distribution of income among domestic economic units. Our main aim is to determine the optimal level of capital import, given that the distribution of income among people is accounted for. In order to consider explicitly the effect of capital import on saving behavior, we shall adopt a simple, two-period life cycle growth model. It will be shown that in order to know if the government can increase everybody's long-run utility, the criterion of the golden rule is important.