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Industry and the Family: Two Engines of Growth

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  • Connolly, Michelle
  • Peretto, Pietro F

Abstract

We generalize the class of endogenous growth models in which the scale of the economy has level rather than growth effects, and study the implications of different demographic and technological factors when both fertility choice and research effort are endogenous. The model incorporates two dimensions of technological progress: vertical (quality of goods) and horizontal (variety of goods). Both dimensions contribute to productivity growth but are driven by different processes and hence respond differently to changes in fundamentals. Specifically, while unbounded vertical progress is feasible, the scale of the economy limits the variety of goods. Incorporating a linearity in reproduction generates steady-state population growth and variety expansion. We thus have two engines of growth generating dynamics that we compare with observed changes in demographics, market structure, and patterns of growth. Numerical solutions yield the important insight that, while endogenous, fertility responds very little to industrial policies. Demographic shocks, in contrast, have substantial effects on growth. Copyright 2003 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 8 (2003)
Issue (Month): 1 (March)
Pages: 115-48

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Handle: RePEc:kap:jecgro:v:8:y:2003:i:1:p:115-48

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Web page: http://www.springerlink.com/link.asp?id=102931

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  1. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
  2. Paul Romer, 1991. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  3. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
  4. Kelly, Morgan, 2001. " Linkages, Thresholds, and Development," Journal of Economic Growth, Springer, vol. 6(1), pages 39-53, March.
  5. Pietro Peretto & Sjak Smulders, 2002. "Technological Distance, Growth And Scale Effects," Economic Journal, Royal Economic Society, vol. 112(481), pages 603-624, July.
  6. Charles I. Jones, 1999. "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," NBER Working Papers 7375, National Bureau of Economic Research, Inc.
  7. Peretto, Pietro F, 1998. " Technological Change, Market Rivalry, and the Evolution of the Capitalist Engine of Growth," Journal of Economic Growth, Springer, vol. 3(1), pages 53-80, March.
  8. Peretto, Pietro F, 1998. " Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
  9. Dalgaard, Carl-Johan & Kreiner, Claus Thustrup, 2001. " Is Declining Productivity Inevitable?," Journal of Economic Growth, Springer, vol. 6(3), pages 187-203, September.
  10. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  11. Kogel, Tomas & Prskawetz, Alexia, 2001. " Agricultural Productivity Growth and Escape from the Malthusian Trap," Journal of Economic Growth, Springer, vol. 6(4), pages 337-57, December.
  12. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
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