The large current account imbalances in the eurozone reflect persistent diverging trends between core and periphery countries, also fed by low interest rates and abundant capital flows brought about by the introduction of the euro. With the global financial crisis, the market sentiment has changed, and capital has left the periphery countries suffering from debt and growth problems due to their failure to bring price-wage dynamics into uniformity with those of the more disciplined countries. Germany is called upon to provide financial assistance and additional external demand; however, though the euro is at stake, Germans are recalcitrant. This article investigates the rationale of the German stance in light of the (corporatist-etatist, neo-mercantilist) German socio-economic model and the widespread concern about losing the competitiveness that Germany regained through painful reforms and changes in the last two decades.

Abstract:We model in an endogenous growth set-up the hypotheses that the expansion of market activities weakens social capital formation, and that firms can invest in formal mechanisms of control and enforcement to substitute for social capital (trust, work ethics, honesty). The model shows that the economy tends to grow faster when it is relatively poorer in social capital and that perpetual growth can be consistent with the progressive erosion of social capital. These results may help reconciling Putnam's claim that social capital has declined in the U.S. with the satisfactory growth performance of the U.S. economy over the same period.

No abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Luigi Bonatti* and Giulia Felice** Terms of use: Documents in Endogenous growth and changing sectoral composition in advanced economies ABSTRACTDespite the striking evidence of the changing sectoral composition in employment and output shares characterizing the growth process, structural change is usually disregarded in growth modeling. In contrast,we focus on how structural change can affect aggregate growth by presenting a two-sector model with a "progressive" industry ("manufacturing"), which exhibits endogenous technological progress and produce both for consumption and for investment, and a technologically "stagnant" industry ("services"), which produces only for consumption. Within this framework, we show under what conditions on preferences perpetual growth can be generated. In particular, the paper demonstrates that positive long-term growth is possible even if what households spend on services tends to increase more than proportionally than their total consumption expenditure, namely when preferences are non-homothetic. This is at odds with previous literature arguing that Baumol's "asymptotic stagnancy" applies when the stagnant industries supply final products. Moreover, the paper does not limit its attention to the balanced growth path: numerical examples illustrate how the transition path displays the regularities which appear to characterize the structural dynamics in advanced economies.

No abstract