Reinterpreting the Jones critique: A time series approach to testing and understanding idea driven growth models with transitional dynamics

Sedgley, Norman; Elmslie, Bruce

doi:10.1016/j.jmacro.2009.12.004

Cited by 6 publications

(9 citation statements)

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“…Studies that have attempted to evaluate the importance of transition dynamics vs. steady state dynamics in the growth of per capita income empirically find that transition dynamics dominates [Jones (2002); Sedgley and Elmslie (2010)]. This implies a difficulty in testing various models solely by steady state predictions as in Zachariadis (2003Zachariadis ( , 2004, Ha and Howitt (2007), and Madsen (2008).…”

Section: Empirical Implicationsmentioning

confidence: 99%

The Dynamic Properties of Endogenous Growth Models

Sedgley

Elmslie

2013

Macroecon. Dynam.

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This paper explores the dynamics of semiendogenous versus fully endogenous growth models in “lab equipment” specifications of the models with expanding sectors. Capital is allowed to accumulate and is used, together with other inputs, to produce new knowledge. The stability of the steady state path is found to be determined by the inequality and/or knife-edge restrictions needed to produce steady state growth. This paper takes the ratio of the shadow price of capital to knowledge and the level of consumption as jump variables. Semiendogenous growth models lead to a 4 × 4 dynamic system where the sign of the coefficient matrix of the log linearized dynamic system is indefinite, leading to a potential for both stable and unstable equilibria. The knife-edge restrictions needed to generate policy influences on growth are shown to be restrictions that reduce the system to 3 × 3 with a positive definite coefficient matrix, thereby guaranteeing a globally stable equilibrium. Implications for empirical testing are addressed.

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Section: Empirical Implicationsmentioning

confidence: 99%

The Dynamic Properties of Endogenous Growth Models

Sedgley

Elmslie

2013

Macroecon. Dynam.

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“…5 Since then, the two-secondgeneration growth models are extensively tested in the context of growth experiences by economies in modern and historical time periods. The validity of the models is examined for the United States and the advanced OECD countries (Jones, 1995;Ha & Howitt, 2007;Ulku, 2007;Madsen, 2008;Sedgley & Elmslie, 2010) and for developing and Asian countries (Madsen et al, 2010b;Ang & Madsen, 2011) in the 20th century. They are also studied in the context of historical growth experiences by Britain and the United States (Ang et al, 2010;Madsen et al, 2010a;Banerjee, 2011).…”

Section: Theory and Empirical Issues (I) Theorymentioning

confidence: 99%

Population Growth and Endogenous Technological Change: Australian Economic Growth in the Long Run*

Banerjee

2012

Economic Record

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Abstract:The Australian growth experience appears to be a three-act phenomenon, with higher per capita income and living standards before 1890 and after 1940, disconnected by a 50-year period of no trend improvement in between. This paper examines the roles of technological progress and population growth in Australian productivity growth over the past two centuries. The empirical results confirm that while population growth had a negative effect, innovative activity had a positive effect on productivity growth. Furthermore, the estimates strongly support the Schumpeterian growth hypothesis, which predicts that productivity growth is driven by the levels of research intensity in the economy.

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“…Ha and Howitt (2007), Madsen (2008), and Ang and Madsen (2011) also use cointegration tests for the stationarity of particular variables to compare the two theories, all finding substantial evidence in favor of Schumpeterian models. Sedgley and Elmslie (2010) also use cointegration tests of productivity trends and include transitional dynamics finding in favor of fully-endogenous theories.…”

Section: Direct Comparisonmentioning

confidence: 99%

“…Support ** Semi-endogenous Jaffe (1986), Hu and Mathews (2005), Jones (1999), Furman et al (2002), Hu and Mathews (2008) Jones (2002) Fully-endogenous (Schumpeterian or 4G) Adams and Jaffe (1996), Furman et al (2002), Griliches (1986), Ha and Howitt (2007) Porter and Stern (2000), Furman and Hayes (2004), Griliches (1990), Madsen (2008) Hu and Mathews (2005), Abdih and Joutz (2006), Sveikauskas (1990), Sedgley and Elmslie (2010) Hu and Mathews (2008), Ang and Madsen (2011).…”

Section: Cointegration Testsmentioning

confidence: 99%

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The Decades‐long Dispute Over Scale Effects in the Theory of Economic Growth

Bond‐Smith

2019

Journal of Economic Surveys

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The so‐called “new growth theory” is characterized by the now Nobel Prize winning insight that ideas are a nonrival input to and output from endogenous investment in innovation. Nonrivalry implies increasing returns to scale, but this also unintentionally creates an empirically disputed scale effect that a growing population implies an ever‐increasing growth rate. Empirical evidence supports fully‐endogenous growth without scale effects, but theoretical issues sustain the decades‐long dispute over exactly how to negate the scale effect. This article surveys theoretical approaches to resolving the scale effect and shows how four generations of endogenous growth theory are defined by the maturing of modeling techniques for constraining increasing returns. The synthesis suggests that the dispute over scale effects is really a narrative about how the powerful application of increasing returns has followed a standard theoretical development pattern. This implies that a fourth generation is now emerging that negates the scale effect while retaining fully‐endogenous growth without relying on assumptions of linearity. Instead, the market response to excessive increasing returns to innovation constrains explosive growth by expanding the market, rather than by a linear assumption. This latest class of endogenous growth models may be the final chapter to resolving the long‐running dispute.

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Reinterpreting the Jones critique: A time series approach to testing and understanding idea driven growth models with transitional dynamics

Cited by 6 publications

References 36 publications

The Dynamic Properties of Endogenous Growth Models

The Dynamic Properties of Endogenous Growth Models

Population Growth and Endogenous Technological Change: Australian Economic Growth in the Long Run*

The Decades‐long Dispute Over Scale Effects in the Theory of Economic Growth

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