Bringing Growth Theory "Down to Earth"

Explicitly accounting for certain basic physical laws governing the “earth” sector dramatically enriches our ability to explain a high degree of diversity in observed patterns of economic growth. We provide a theoretical explanation of why some countries have been able to sustain a more or less constant and positive rate of economic growth for many decades while so many others have failed to do so. The analysis predicts that countries that have an over abundance of physical capital (a concept that is precisely defined in the text) may be unable to sustain a positive rate of economic growth over the long run. Too much physical capital may affect the dynamics of the economy ultimately leading to stagnation. The plausibility of the growth model introduced here is demonstrated by its ability to predict some important stylized facts for which standard endogenous growth models generally cannot account.


Issue Date:
2009
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/48944
Total Pages:
53
JEL Codes:
E22; Q01; O41
Series Statement:
Working Paper
09-01




 Record created 2017-04-01, last modified 2017-04-04

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