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Economic Performance Through Time: A General Equilibrium Model

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  • Wenli Cheng
  • Xiaonan Zhao

Abstract

This paper presents a simple general equilibrium model of economic performance through time. The model incorporates 4 main determinants of economic performance: technology, capital investment, the division of labor and institutions. It demonstrates that growth is not automatic even with technological progress. In order to maintain economic growth, it is important to continuously implement new technologies through capital investment. It also shows that institutional improvement promotes the social division of labour, which is an independent source of economic growth.

Suggested Citation

  • Wenli Cheng & Xiaonan Zhao, 2008. "Economic Performance Through Time: A General Equilibrium Model," Monash Economics Working Papers 01/08, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2008-01
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2008/0108economicchengzhouprint.pdf
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    References listed on IDEAS

    as
    1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    2. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 43-61.
    3. J. Bradford De Long & Lawrence H. Summers, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 445-502.
    4. J. Bradford DeLong & Lawrence H. Summers, 1992. "Equipment Investment and Economic Growth: How Strong Is the Nexus?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 157-212.
    5. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633.
    6. North, Douglass C, 1987. "Institutions, Transaction Costs and Economic Growth," Economic Inquiry, Western Economic Association International, vol. 25(3), pages 419-428, July.
    7. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    economic growth; savings and investment; transaction costs; division of labor; financial and production institutions;

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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