Life Cycle Savings, Bequest, and the Diminishing Impact of Scale on Growth
AbstractThere appears to be ample evidence that the size of population acted as a stimulus to growth in historical times; scale mattered. In the post World War II era, however, there is little evidence of such scale effects on growth. Where did the scale effect go? The present paper shows that the savings motive critically affects the size and sign of scale effects in standard endogenous growth models. If the bequest motive dominates, the scale effect is positive. If the life cycle motive dominates, the scale effect is ambiguous and may be negative. A declining importance of bequest in capital accumulation could therefore be one reason why scale seems to matter less today than in historical times.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 07-17.
Length: 16 pages
Date of creation: Aug 2007
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overlapping generations; endogenous growth; scale effects;
Find related papers by JEL classification:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-16 (All new papers)
- NEP-DEV-2007-09-16 (Development)
- NEP-HIS-2007-09-16 (Business, Economic & Financial History)
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