Agglomeration and population ageing in a two region model of exogenous growth
Theresa Grafeneder-Weissteiner and Klaus Prettne (Vienna Institute of Demography), 2009
This article investigates the effects of introducing demography into the New Economic Geography. We generalize the constructed capital approach, which relies on infinite individual planning horizons, by introducing mortality. The resulting overlapping generation framework with heterogeneous individuals allows us to study the effects of ageing on agglomeration processes by analytically identifying the level of trade costs that triggers catastrophic agglomeration. Interestingly, this threshold value is rather sensitive to changes in mortality. In particular, the introduction of a positive mortality rate makes the symmetric equilibrium more stable and therefore counteracts agglomeration tendencies. In sharp contrast to other New Economic Geography approaches, this implies that deeper integration is not necessarily associated with higher interregional inequality.
Does an exogenous or an endogenous growth model fare better? Evidence from the GDP growth rates of 24 OECD countries
Hsiu-Yun Lee, 2003
This paper evaluates typical exogenous and endogenous growth models in light of their transitional dynamics implications. Rather than selecting a very special stochastic process of technology shock so as to match a specific output process, we assume only a simple AR transitory shock in both growth models. After deriving the growth rate of output under the two models, this paper tests the cross-equation restrictions for 24 OECD countries’ output growth rates. We find all but one of the growth series pass the endogenous growth hypothesis. However, even with the transitional dynamics implications in both models, in 75% of the OECD countries the output dynamics are observationally equivalent between the endogenous and the exogenous growth models.
Neoclassical vs. endogenous growth analysis: an overview
Bennett T. McCallum (Federal Reserve Bank of Richmond Economic Quarterly), 1996
After a long period of quiescence, growth economics has in the last decade (1986–1995) become an extremely active area of research – both theoretical and empirical. To appreciate recent developments and understand associated controversies, it is necessary to place them in context, i.e., in relation to the corpus of growth theory that existed prior to this current burst of activity. This article’s exposition will begin, then the neoclassical growth model that prevailed as of 1985. Once that has been accomplished, we shall compare some crucial implications of the neoclassical model with empirical evidence. After tentatively concluding that the neoclassical setup is unsatisfactory in several important respects, we shall then briefly describe a family of “endogenous growth” models and consider controversies regarding these two classes of theories. Much of this exposition will be conducted in the context of a special-case example that permits an exact analytical solution so that explicit comparisons can be made. Finally, some overall conclusions are tentatively put forth. These conclusions, it can be said in advance, are broadly supportive of the endogenous growth approach. Although the article contends that this approach does not strictly justify the conversion of “level effects” into “rate of growth effects,” which some writers take to be the hallmark of endogenous growth theory, it finds that the quantitative predictions of such a conversion may provide good approximations to those strictly implied.