(1) Department of Economics, The Chinese University of Hong Kong, Shatin, NT, Hong Kong;(2) Department of Economics, The University of Western Australia, 35 Stirling Highway, Crawley, WA, 6009, Australia
Abstract:
Recent empirical evidence demonstrates that a higher level of technical progress is associated with a lower level of growth
volatility and higher expected economic growth. This paper builds a simple growth model which combines the insights of Angeletos
and Kollintzas (2000) and Tse (2000; 2001; 2002) with endogenous productivity growth and rent-seeking behavior to account
for these stylized facts. Our model complements the literature that focuses on the heterogeneity of different agents.