IDEAS home Printed from https://ideas.repec.org/p/uea/ueaeco/2017_04.html
   My bibliography  Save this paper

Wealth creation, wealth dilution and population dynamics

Author

Listed:
  • Christa N. Brunnschweiler

    (University of East Anglia)

  • Pietro F. Peretto

    (Duke University)

  • Simone Valente

    (University of East Anglia)

Abstract

Wealth creation driven by R&D investment and wealth dilution caused by disconnected generations interact with households' fertility decisions, delivering a theory of sustained endogenous output growth with a constant endogenous population level in the long run. Unlike traditional theories, our model fully abstracts from Malthusian mechanisms and provides a demography-based view of the long run where the ratios of key macroeconomic variables - consumption, labor incomes and financial assets - are determined by demography and preferences, not by technology. Calibrating the model parameters on OECD data, we show that negative demographic shocks induced by barriers to immigration or increased reproduction costs may raise growth in the very long run, but reduce the welfare of a long sequence of generations by causing permanent reductions in the mass of firms and in labor income shares, as well as prolonged stagnation during the transition.

Suggested Citation

  • Christa N. Brunnschweiler & Pietro F. Peretto & Simone Valente, 2017. "Wealth creation, wealth dilution and population dynamics," University of East Anglia School of Economics Working Paper Series 2017-04, School of Economics, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:ueaeco:2017_04
    as

    Download full text from publisher

    File URL: https://ueaeco.github.io/working-papers/papers/ueaeco/UEA-ECO-17-04.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    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. Ben R. Craig & William E. Jackson & James B. Thomson, 2004. "On SBA-guaranteed lending and economic growth," Working Papers (Old Series) 0403, Federal Reserve Bank of Cleveland.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    4. Jordi Galí & Mark Gertler & J. David López-Salido, 2007. "Markups, Gaps, and the Welfare Costs of Business Fluctuations," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 44-59, November.
    5. James M. Poterba, 2000. "Stock Market Wealth and Consumption," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 99-118, Spring.
    6. Erik Britton & Jens D J Larsen & Ian Small, 2000. "Imperfect competition and the dynamics of mark-ups," Bank of England working papers 110, Bank of England.
    7. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    8. Miguel-Angel Martín & Agustín Herranz, 2004. "Human capital and economic growth in Spanish regions," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 10(4), pages 257-264, November.
    9. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Morimoto, Takaaki & Tabata, Ken, 2020. "Higher Education Subsidy Policy And R&D-Based Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 24(8), pages 2129-2168, December.
    2. MADSEN, Jakob B, 2018. "Is Inequality Increasing in r-g? The Dynamics of Capital’s Income Share in the UK, 1210-2013," Discussion paper series HIAS-E-70, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    3. Tabata, Ken, 2024. "Redistributive policy and R&D-based growth," Journal of Macroeconomics, Elsevier, vol. 79(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Etro, Federico, 2017. "Research in economics and macroeconomics," Research in Economics, Elsevier, vol. 71(3), pages 373-383.
    2. Yasir Khan & Attiya Yasmin Javid, 2015. "The Impact of Formal and Informal Institutions on Economic Performance: A Cross-Country Analysis," PIDE-Working Papers 2015:130, Pakistan Institute of Development Economics.
    3. Martin Neil Baily & Charles L. Schultze, 1990. "The Productivity of Capital in a Period of Slower Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990 Micr), pages 369-420.
    4. Nikolay Chernyshev, 2017. "The Relationship between R&D and Competition: Reconciling Theory and Evidence," CDMA Working Paper Series 201704, Centre for Dynamic Macroeconomic Analysis.
    5. Chang, Shu-hua & Lai, Ching-chong, 2016. "Vertical separation versus vertical integration in an endogenously growing economy," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 359-380.
    6. Yi-Ling Cheng & Juin-Jen Chang, 2017. "The Quality of Intermediate Goods: Growth and Welfare Implications," The Economic Record, The Economic Society of Australia, vol. 93(302), pages 434-447, September.
    7. Duranton, Gilles & Puga, Diego, 2014. "The Growth of Cities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 5, pages 781-853, Elsevier.
    8. Gancia, Gino & Zilibotti, Fabrizio, 2005. "Horizontal Innovation in the Theory of Growth and Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 3, pages 111-170, Elsevier.
    9. Éléonore Boiscuvier, 2001. "Innovation, intégration et développement régional," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(2), pages 255-280.
    10. Andreas Schäfer & Thomas Steger, 2014. "Journey into the Unknown? Economic Consequences of Factor Market Integration under Increasing Returns to Scale," Review of International Economics, Wiley Blackwell, vol. 22(4), pages 783-807, September.
    11. Balakrishnan, Pulapre & Das, Mausumi & Parameswaran, M., 2017. "The internal dynamic of Indian economic growth," Journal of Asian Economics, Elsevier, vol. 50(C), pages 46-61.
    12. Davis, Colin & Hashimoto, Ken-ichi & Tabata, Ken, 2022. "Demographic structure, knowledge diffusion, and endogenous productivity growth," Journal of Macroeconomics, Elsevier, vol. 71(C).
    13. Kichko, Sergey, 2017. "Input–output linkages and optimal product diversity," Economics Letters, Elsevier, vol. 158(C), pages 58-61.
    14. Carlos Humberto Ortíz, 2013. "Economic growth consequences of structural stagnation: A two-sector model of productive diversification," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 78, pages 73-113.
    15. Ciccone, Antonio & Matsuyama, Kiminori, 1996. "Start-up costs and pecuniary externalities as barriers to economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 33-59, April.
    16. Lai, Mingyong & Peng, Shuijun & BAO, Qun, 2006. "Technology spillovers, absorptive capacity and economic growth," China Economic Review, Elsevier, vol. 17(3), pages 300-320.
    17. Minor, Peter J., 2010. "Time as a Barrier to Trade: A GTAP Database of ad valorem Trade Time Costs," Conference papers 331960, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    18. Richard Harris & John Moffat & Victoria Kravtsova, 2011. "In Search of ‘ W ’," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(3), pages 249-270, February.
    19. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
    20. Peng, Shin-Kun & Thisse, Jacques-Francois & Wang, Ping, 2006. "Economic integration and agglomeration in a middle product economy," Journal of Economic Theory, Elsevier, vol. 131(1), pages 1-25, November.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uea:ueaeco:2017_04. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Cara Liggins (email available below). General contact details of provider: https://edirc.repec.org/data/esueauk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.