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When Economic Growth is Less than Exponential

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Author Info

  • Christian Groth

    (Department of Economics, University of Copenhagen)

  • Karl-Josef Koch

    (University of Siegen)

  • Thomas M. Steger

    (University of Leipzig and CESifo Munich)

Abstract

This paper argues that growth theory needs a more general notion of “regularity” than that of exponential growth. We suggest that paths along which the rate of decline of the growth rate is proportional to the growth rate itself deserve attention. This opens up for considering a richer set of parameter combinations than in standard growth models. And it avoids the usual oversimplistic dichotomy of either exponential growth or stagnation. Allowing zero population growth in three different growth models (the Jones R&D-based model, a learning-by-doing model, and an embodied technical change model) serve as illustrations that a continuum of “regular” growth processes fill the whole range between exponential growth and complete stagnation.

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Bibliographic Info

Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 2009-03.

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Length: 30 pages
Date of creation:
Date of revision: May 2009
Handle: RePEc:kud:epruwp:09-03

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Keywords: quasi-arithmetic growth; regular growth; semi-endogenous growth; knife-edge restrictions; learning by doing; embodied technical change;

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References

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  1. Kremer, Michael, 1993. "Population Growth and Technological Change: One Million B.C. to 1990," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 681-716, August.
  2. Raouf BOUCEKKINE & Fernando DEL RIO & Omar LICANDRO, 2002. "Embodied Technological Change, Learning-by-Doing and the Productivity Slowdown," Economics Working Papers ECO2002/12, European University Institute.
  3. Asheim, Geir B. & Buchholz, Wolfgang & Hartwick, John M. & Mitra, Tapan & Withagen, Cees, 2007. "Constant savings rates and quasi-arithmetic population growth under exhaustible resource constraints," Journal of Environmental Economics and Management, Elsevier, vol. 53(2), pages 213-229, March.
  4. Orazio P. Attanasio & Guglielmo Weber, 1994. "Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey," NBER Working Papers 4795, National Bureau of Economic Research, Inc.
  5. Maria J. Alvarez-Pelaez & Christian Groth, 2002. "Too little or too much R&D?," Discussion Papers 02-01, University of Copenhagen. Department of Economics.
  6. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  7. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  8. Growiec, Jakub, 2008. "Knife-edge conditions in the modeling of long-run growth regularities," MPRA Paper 9956, University Library of Munich, Germany.
  9. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
  10. Hendrik Hakenes & Andreas Irmen, 2005. "On the Long-Run Evolution of Technological Knowledge," CESifo Working Paper Series 1483, CESifo Group Munich.
  11. Charles I. Jones, 2004. "Growth and Ideas," NBER Working Papers 10767, National Bureau of Economic Research, Inc.
  12. John C. V. Pezzey, 2002. "Exact Measures of Income in a Hyperbolic Economy," Economics and Environment Network Working Papers 0203, Australian National University, Economics and Environment Network.
  13. Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
  14. Lutz G. Arnold, 2006. "The Dynamics of the Jones R&D Growth Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 143-152, January.
  15. Solow, Robert M., 2000. "Growth Theory: An Exposition," OUP Catalogue, Oxford University Press, edition 2, number 9780195109030.
  16. Mitra, Tapan, 1983. "Limits on Population Growth under Exhaustible Resource Constraints," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 155-68, February.
  17. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  18. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-74, December.
  19. Jakub Growiec, 2007. "Beyond the Linearity Critique: The Knife-edge Assumption of Steady-state Growth," Economic Theory, Springer, vol. 31(3), pages 489-499, June.
  20. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  21. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, December.
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Citations

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Cited by:
  1. Antonio Minniti & Carmelo Parello & Paul Segerstrom, 2013. "A Schumpeterian growth model with random quality improvements," Economic Theory, Springer, vol. 52(2), pages 755-791, March.
  2. Holden, Tom, 2011. "Products, patents and productivity persistence: A DSGE model of endogenous growth," Dynare Working Papers 4, CEPREMAP.
  3. Bazhanov, Andrei, 2010. "Constant-utility paths in a resource-based economy," MPRA Paper 27619, University Library of Munich, Germany, revised 20 Dec 2010.
  4. Growiec, Jakub, 2010. "Knife-edge conditions in the modeling of long-run growth regularities," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1143-1154, December.
  5. Tom Holden, 2012. "Medium-frequency cycles and the remarkable near trend-stationarity of output," School of Economics Discussion Papers 1412, School of Economics, University of Surrey.
  6. Grossmann, Volker, 2008. "Entrepreneurial Innovation and Sustained Long-Run Growth without Weak or Strong Scale Effects," IZA Discussion Papers 3389, Institute for the Study of Labor (IZA).
  7. Grossmann, Volker, 2009. "Entrepreneurial innovation and economic growth," Journal of Macroeconomics, Elsevier, vol. 31(4), pages 602-613, December.
  8. Groth, Christian & Wendner, Ronald, 2011. "Learning by investing, embodiment, and speed of convergence," MPRA Paper 29008, University Library of Munich, Germany.
  9. Groth, Christian & Wendner, Ronald, 2014. "Embodied learning by investing and speed of convergence," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 245-269.

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