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The spirit of capitalism, innovation and long-run growth

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  • Shi, Bowen
  • Wang, Gaowang
  • Zou, Heng-fu

Abstract

We develop an endogenous growth model incorporating the spirit of capitalism and examine how it influences innovation and economic growth. In the benchmark homogeneous-ability model, we find that the spirit of capitalism increases both the capital accumulation rate by enhancing consumer patience and the knowledge accumulation rate by reallocating human capital from the final goods sector to the R&D sector, both of which drive the endogenous growth of the macroeconomy. In the extended heterogeneous-ability model, we identify an additional channel through which the spirit of capitalism boosts innovation and economic growth: by lowering the shreshold ability required to become an entrepreneur and increasing the amount of human capital working in the R&D sector.

Suggested Citation

  • Shi, Bowen & Wang, Gaowang & Zou, Heng-fu, 2019. "The spirit of capitalism, innovation and long-run growth," MPRA Paper 122417, University Library of Munich, Germany, revised 17 Oct 2024.
    • Handle: RePEc:pra:mprapa:122417
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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