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Factor Shares, Income Distribution and Capital Flows

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  • Hernando Zuleta

Abstract

We present an endogenous growth model where innovations are factor-saving and model the choice of technologies in an Overlapping Generations Model where any technology can be adopted paying a cost. Markets are competitive and marginal productivity of factors determines factor prices; therefore, the income share of reproducible factors increases with the stage of development. Beyond the standard results of this type of model we find that (i) In poor economies technological change may reduce future income, (ii) without bequests long run growth is not possible, (iii) if the economy presents long run growth then intra generation inequality may last forever but if the economy does not present long run growth then in steady state there is no intra generation inequality (iv) when the economy is open the pattern of capital flows depends not only on the relative abundance of factors but also on the technologies and, for this reason, capital may not flow from rich to poor economies (v) consequently, capital flows may not help to break poverty traps.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c016_003.

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Length: 31 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:deg:conpap:c016_003

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Related research

Keywords: Endogenous Growth; Capital Income Share; Income Distribution; Technology; Capital Flows;

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References

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  1. Giuseppe Bertola, 1991. "Factor Shares and Savings in Endogenous Growth," NBER Working Papers 3851, National Bureau of Economic Research, Inc.
  2. Hernando Zuleta, 2008. "An empirical note on factor shares," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(3), pages 379-390.
  3. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  4. Francesco Caselli & James Feyrer, 2005. "The Marginal Product of Capital," NBER Working Papers 11551, National Bureau of Economic Research, Inc.
  5. Zeira, Joseph, 1995. "Workers, Machines and Economic Growth," CEPR Discussion Papers 1139, C.E.P.R. Discussion Papers.
  6. Michele Boldrin & David K. Levine, 2002. "Factor saving innovation," Staff Report 301, Federal Reserve Bank of Minneapolis.
  7. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
  8. Boldrin, Michele, 1992. "Dynamic externalities, multiple equilibria, and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 198-218, December.
  9. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  10. Brad Sturgill, 2010. "Cross-country Variation in Factor Shares and its Implications for Development Accounting," DEGIT Conference Papers c015_014, DEGIT, Dynamics, Economic Growth, and International Trade.
  11. Bertola, Giuseppe, 1996. "Factor shares in OLG models of growth," European Economic Review, Elsevier, vol. 40(8), pages 1541-1560, November.
  12. Jones, Larry E. & Manuelli, Rodolfo E., 1992. "Finite lifetimes and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 171-197, December.
  13. Olivier de La Grandville & Rainer Klump, 2000. "Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions," American Economic Review, American Economic Association, vol. 90(1), pages 282-291, March.
  14. Hernando Zuleta, 2008. "Factor Saving Innovations and Factor Income Shares," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 836-851, October.
  15. Joseph Zeira, 2006. "Machines as Engines of Growth," DEGIT Conference Papers c011_059, DEGIT, Dynamics, Economic Growth, and International Trade.
  16. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  17. Galor, Oded, 2000. "Income distribution and the process of development," European Economic Review, Elsevier, vol. 44(4-6), pages 706-712, May.
  18. David N. Weil & Joshua Wilde, 2009. "How Relevant Is Malthus for Economic Development Today?," American Economic Review, American Economic Association, vol. 99(2), pages 255-60, May.
  19. Hernando Zuleta, 2004. "A Note on Scale Effects," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 237-242, January.
  20. Peter Gottschalk, 1997. "Inequality, Income Growth, and Mobility: The Basic Facts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 21-40, Spring.
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