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Introduction Modeling new goods Kaldor's stylized facts of economic growth

International Trade & the World Economy;  Charles van Marrewijk. CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT. Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth

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Introduction Modeling new goods Kaldor's stylized facts of economic growth

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  1. International Trade & the World Economy;  Charles van Marrewijk CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions

  2. International Trade & the World Economy;  Charles van Marrewijk CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions

  3. International Trade & the World Economy;  Charles van Marrewijk Introduction Paul Romer (1955 - )

  4. International Trade & the World Economy;  Charles van Marrewijk CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions

  5. International Trade & the World Economy;  Charles van Marrewijk Modeling new goods The variety approach

  6. International Trade & the World Economy;  Charles van Marrewijk Modeling new goods The quality approach

  7. International Trade & the World Economy;  Charles van Marrewijk CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions

  8. International Trade & the World Economy;  Charles van Marrewijk Kaldor's stylized facts of economic growth • Nicholas Kaldor (1961) suggested the following list of stylized facts: • The continued growth in the aggregate volume of production and in the productivity of labor at a steady trend rate. • A continued increase in the amount of capital per worker. • A steady rate of profit on capital. • Steady capital-output ratios over long periods. • A steady investment coefficient, and a steady share of profits and wages.

  9. International Trade & the World Economy;  Charles van Marrewijk Kaldor's stylized facts of economic growth

  10. International Trade & the World Economy;  Charles van Marrewijk Kaldor's stylized facts of economic growth

  11. International Trade & the World Economy;  Charles van Marrewijk CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions

  12. International Trade & the World Economy;  Charles van Marrewijk The neo-classical model and the Solow residual

  13. International Trade & the World Economy;  Charles van Marrewijk The neo-classical model and the Solow residual

  14. International Trade & the World Economy;  Charles van Marrewijk CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions

  15. International Trade & the World Economy;  Charles van Marrewijk Empirical pictures

  16. International Trade & the World Economy;  Charles van Marrewijk Empirical pictures

  17. International Trade & the World Economy;  Charles van Marrewijk CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions

  18. International Trade & the World Economy;  Charles van Marrewijk Endogenous growth • Paul Romer’s (1994) list of stylized facts: • There are many firms in a market economy. • Discoveries differ from other inputs in that many people can use them at the same time (nonrival goods). • It is possible to replicate physical activities. • Technological advance comes from things that people do. • Many individuals and firms have market power and earn monopoly rents on discoveries.

  19. International Trade & the World Economy;  Charles van Marrewijk Operating profit for manufactures producer Future profits discounted; profits erode if number of varieties increases Endogenous growth Production function: • Inventing new variety represents fixed cost; with knowledge spillovers economy steadily grows forever; growth rate higher if: • the labor force is higher (increasing returns to scale ensure that size is important) • the fixed costs of investment F are lower, and • the discount rate is lower.

  20. International Trade & the World Economy;  Charles van Marrewijk CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions

  21. International Trade & the World Economy;  Charles van Marrewijk An experiment in geographical economics Experiment w. 12 city racetrack; Herfindahl = measure of agglomeration

  22. International Trade & the World Economy;  Charles van Marrewijk An experiment in geographical economics

  23. International Trade & the World Economy;  Charles van Marrewijk CHAPTER 16; NEW GOODS, GROWTH & DEVELOPMENT Introduction Modeling new goods Kaldor's stylized facts of economic growth The neo-classical model and the Solow residual Empirical pictures Endogenous growth An experiment in geographical economics Conclusions

  24. International Trade & the World Economy;  Charles van Marrewijk Conclusions Rising per capita income is relatively new phenomenon. Some countries have experienced relatively steady growth, others long periods of stagnation and rapid increases. Neo-classical model based on capital accumulation needs exogenous technological change to ‘explain’ growth; large Solow residual. Endogenous growth models based on imperfect competition and innovation (new goods and/or quality improvements) led by entrepreneurs in search of profits. Large swings in economic prosperity may be explained by geographical economics model.

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