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The spirit of capitalism and long-run growth

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  • Heng-fu Zou

Abstract

Why do different countries have different long-term savings and growth rates? Why is the productivity rate not the same around the world? Recent new theories of endogenous growth have tried to answer these questions by replacing the usual assumption of diminishing returns in production. The author offers an alternative: he introduces"the spirit of capitalism"into the model. In the long run, countries with different degrees of capitalist spirit will have different consumption, capital stock, and endogenous growth rates. In his model, inflation is no longer superneutral in relation to long-run growth. The author provides a formal model that is supported by many empirical and historical studies on cultural attributes and economic development. His model helps explain: (a) why Japan and four East Asian countries, South Korea, Taiwan, Hong Kong and Singapore have succeeded; (b) why nations that had an established Protestant religion in 1870 had a per capita income in 1979 that was more than a third higher than in Catholic nations; and (c) why British industry has declined since 1850.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 630.

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Date of creation: 31 Mar 1991
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Handle: RePEc:wbk:wbrwps:630

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Keywords: Economic Theory&Research; Economic Growth; Inequality; Achieving Shared Growth; Economic Conditions and Volatility;

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References

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  1. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
  2. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  3. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 500-521, June.
  4. Heng-fu Zou, 1995. "The spirit of capitalism and savings behavior," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 79, China Economics and Management Academy, Central University of Finance and Economics.
  5. Zou, Heng-fu, 1994. "'The spirit of capitalism' and long-run growth," European Journal of Political Economy, Elsevier, vol. 10(2), pages 279-293, July.
  6. J. Bradford De Long, . "Productivity Growth, Convergence, and Welfare: Comment," J. Bradford De Long's Working Papers, University of California at Berkeley, Economics Department _129, University of California at Berkeley, Economics Department.
  7. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 163, Cowles Foundation for Research in Economics, Yale University.
  8. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc.
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