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Life Cycle Savings, Bequest, and the Diminishing Impact of Scale on Growth

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Author Info

  • Carl-Johan Dalgaard

    (Department of Economics, University of Copenhagen)

  • Martin Kaae Jensen

    (University of Birmingham)

Abstract

There 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 Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 07-17.

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Length: 16 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:kud:kuiedp:0717

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Related research

Keywords: overlapping generations; endogenous growth; scale effects;

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  1. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(437), pages 1056-69, July.
  2. Dalgaard, Carl-Johan & Kreiner, Claus Thustrup, 2001. " Is Declining Productivity Inevitable?," Journal of Economic Growth, Springer, Springer, vol. 6(3), pages 187-203, September.
  3. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 531-55, May.
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Cited by:
  1. Shekhar Aiyar & Carl-Johan Dalgaard, 2008. "Accounting for Productivity: Is it OK to Assume that the World is Cobb-Douglas?," Discussion Papers 08-14, University of Copenhagen. Department of Economics.
  2. Lars Kunze, 2009. "Capital Taxation, Long-run Growth, and Bequests," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0113, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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