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Bringing Growth Theory "Down to Earth"

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  • Lopez, Ramon E.
  • Stocking, Andrew

Abstract

Explicitly accounting for certain basic physical laws governing the “earth” sector dramatically enriches our ability to explain a high degree of diversity in observed patterns of economic growth. We provide a theoretical explanation of why some countries have been able to sustain a more or less constant and positive rate of economic growth for many decades while so many others have failed to do so. The analysis predicts that countries that have an over abundance of physical capital (a concept that is precisely defined in the text) may be unable to sustain a positive rate of economic growth over the long run. Too much physical capital may affect the dynamics of the economy ultimately leading to stagnation. The plausibility of the growth model introduced here is demonstrated by its ability to predict some important stylized facts for which standard endogenous growth models generally cannot account.

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Bibliographic Info

Paper provided by University of Maryland, Department of Agricultural and Resource Economics in its series Working Papers with number 48944.

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Date of creation: 2009
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Handle: RePEc:ags:umdrwp:48944

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Related research

Keywords: endogenous growth theory; unbalanced growth; structural change; stagnation; Environmental Economics and Policy; International Development; Labor and Human Capital; Political Economy; E22; Q01; O41;

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Cited by:
  1. Lopez, Ramon E., 2008. ""Sustainable" Economic Growth: The Ominous Potency of Structural Change," Working Papers 46592, University of Maryland, Department of Agricultural and Resource Economics.

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