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Weak Scale Effects in Overlapping Generations Economy

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  • Bharat Diwakar
  • Gilad Sorek

Abstract

We show how the two alternative saving motives, life-cycle consumption smoothing and parental bequests, determine the relation between population growth and R&D-based economic growth, i.e. the sign of the weak scale effect. We take a textbook R&D-based growth model of infinitely living agents with no life-cycle saving motive and re-analyze it in the Overlapping Generations (OLG) framework, which incorporates both life-cycle and bequest saving motives. We decompose the effect of each saving motive on the sign of the weak scale effect, and show that in the presence of both saving motives it is ambiguous in general, and may also be non-monotonic. Hence, this study contributes to the recent line of research aimed to align modern growth theory with the empirical evidence on the relation between population growth and economic prosperity.

Suggested Citation

  • Bharat Diwakar & Gilad Sorek, 2016. "Weak Scale Effects in Overlapping Generations Economy," Auburn Economics Working Paper Series auwp2016-12, Department of Economics, Auburn University.
    • Handle: RePEc:abn:wpaper:auwp2016-12
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    File URL: https://cla.auburn.edu/econwp/Archives/2016/2016-12.pdf
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    More about this item

    Keywords

    R&D-based Growth; Weak Scale-Effect; Bequests; OLG;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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