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Birth, Death, and Dynamic Inefficiency in an Endogenous Growth Model

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  • James Kahn
  • Jong-Soo Lim
  • Changyong Rhee

Abstract

This paper builds a finite horizon endogenous growth model by incorporating Lucas' (1988) human capital model into an uncertain lifetime framework a la Buiter (1988). Our finite horizon model has different policy implication from infinite horizon models. For example, a non-positive link between capital income taxation and economic growth in infinite horizon models does not hold in our finite horizon model. Also, our finite horizon model shows that the short-run macro management policy which has only the level effect in infinite horizon models can affect the long-run economic growth. [O4]

Suggested Citation

  • James Kahn & Jong-Soo Lim & Changyong Rhee, 1997. "Birth, Death, and Dynamic Inefficiency in an Endogenous Growth Model," International Economic Journal, Taylor & Francis Journals, vol. 11(3), pages 85-102.
  • Handle: RePEc:taf:intecj:v:11:y:1997:i:3:p:85-102
    DOI: 10.1080/10168739700000021
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Cass, David, 1972. "On capital overaccumulation in the aggregative, neoclassical model of economic growth: A complete characterization," Journal of Economic Theory, Elsevier, vol. 4(2), pages 200-223, April.
    3. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    4. Jones, Larry E. & Manuelli, Rodolfo E., 1992. "Finite lifetimes and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 171-197, December.
    5. Chamley, Christophe, 1981. "The Welfare Cost of Capital Income Taxation in a Growing Economy," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 468-496, June.
    6. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-247, April.
    7. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-293, June.
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