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The spirit of capitalism and long-run growth

Author

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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.

Suggested Citation

  • Heng-fu Zou, 1991. "The spirit of capitalism and long-run growth," Policy Research Working Paper Series 630, The World Bank.
  • Handle: RePEc:wbk:wbrwps:630
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    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. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
    3. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    4. 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.
    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. De Long, J Bradford, 1988. "Productivity Growth, Convergence, and Welfare: Comment," American Economic Review, American Economic Association, vol. 78(5), pages 1138-1154, December.
    7. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc.
    8. Heng-fu Zou, 1995. "The spirit of capitalism and savings behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 28(1), pages 131-143, September.
    9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    More about this item

    Keywords

    Economic Theory&Research; Economic Growth; Inequality; Achieving Shared Growth; Economic Conditions and Volatility;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
    • B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
    • P10 - Economic Systems - - Capitalist Systems - - - General

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