Abstract. This paper introduces consumption externalities into an endogenous growth model of common capital accumulation and characterizes balanced growth equilibria. Contrary to the standard argument in previous studies, we show that the growth rate in a feedback Nash equilibrium can be higher than that in an open-loop Nash equilibrium if agents strongly admire the consumption of others. This result is irrelevant to whether preferences exhibit "keeping up with the Joneses" or "running away from the Joneses".
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AbstractThis paper combines three prototype endogenous growth models, the models with human capital accumulation introduced by Uzawa [1965] and Lucas [1988], variety expansion by Romer [1990], and quality improvements by Aghion and Howitt [1992], in order to investigate how these three engines of growth interact. We show that a subsidy to human capital accumulation has a positive impact on R&D effort, as well as on human capital accumulation. On the other hand, a subsidy to R&D sectors does not affect human capital accumulation in our model. Moreover, we show that equilibrium dynamics is locally saddle-path stable around the steady growth path. It suggests that Schumpeterian growth modelsà la Howitt [1999] should share the locally saddle-path stable property. Finally, since in our model the percapita output growth rate is endogenously determined by both technology improvements and human capital accumulation, it bridges the gap between the literature on Schumpeterian growth models and that on growth empirics.
This paper explores relationships among economic growth, unemployment, and business cycles by constructing a model, which views the process of creative destruction as a major source of business cycles, as well as of economic growth. The main results are as follows: first, the long-run growth rate has a negative relationship with the amplitude of business cycles. Second, the growth rate has a negative connect ion wit h the frequency of slump. Third, a permanent shock causes unemployment, but a transitory shock leads to full employment.
This paper develops a tractable model for the simultaneous investigation of the exit of firms and economic growth. Using this model, it shows that the existence of exit of firms weakens the positive effects of an intensified product market competition on the growth rate. A more intense product market competition encourages surviving firms to innovate by raising the marginal gain from innovation, while it discourages them to innovate due to raising the possibility of firms to exit the market. This implies that an increase of intensity of competition may reduce the growth rate if it causes too many firms to exit the market. The result contrasts with that of standard creative-destruction models.
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