R&D Policy in Economies with Endogenous Growth and Non-Renewable Resources

The aim of this paper is to analyze how active R&D policies affect the growth rate of an economy with endogenous growth and non-renewable resources. We know from Scholz and Ziemens (1999) and Groth (2006) that in infinitely lived agents (ILA) economies, any active R&D policy increases the growth rate of the economy. To see if this result also appears in economies with finite lifetime agents, we developed an endogenous growth overlapping generations (OLG) economy à la Diamond which uses non-renewable resources as essential inputs in final good’s production. We show analytically that any R&D policy that reduces the use of natural resources implies a raise in the growth rate of the economy. Numerically we show that in economies with low intertemporal elasticity of substitution (IES), active R&D policies lead the economy to increase the depletion of non-renewable resources. Nevertheless, we find that active R&D policies always imply increases in the endogenous growth rate, in both scenarios. Furthermore, when the IES coefficient is lower (greater) than one, active R&D policies affect the growth rate of the economy in the ILA more (less) than in OLG economies.

Life Expectancy, Schooling Time and Endogenous Growth

Published as an article in: Economic Inquiry, 2004, vol. 42, issue 4, pp. 602–617.

Cyclical Features of Uzawa-Lucas Endogenous Growth Model

This paper analyzes the cyclical properties of a generalized version of Uzawa-Lucas endogenous growth model. We study the dynamic features of different cyclical components of this model characterized by a variety of decomposition methods. The decomposition methods considered can be classified in two groups. On the one hand, we consider three statistical filters: the Hodrick-Prescott filter, the Baxter-King filter and Gonzalo-Granger decomposition. On the other hand, we use four model-based decomposition methods. The latter decomposition procedures share the property that the cyclical components obtained by these methods preserve the log-linear approximation of the Euler-equation restrictions imposed by the agent’s intertemporal optimization problem. The paper shows that both model dynamics and model performance substantially vary across decomposition methods. A parallel exercise is carried out with a standard real business cycle model. The results should help researchers to better understand the performance of Uzawa-Lucas model in relation to standard business cycle models under alternative definitions of the business cycle.

Energy Supply and the Sustainability of Endogenous Growth

29 p.

Long-Term Growth and Persistence with Endogenous Depreciation: Theory and Evidence

Previous research has shown a strong positive correlation between short-term persistence and long-term output growth as well as between depreciation rates and long-term output growth. This evidence, therefore, contradicts the standard predictions from traditional neoclassical or AK-type growth models with exogenous depreciation. In this paper, we first confirm these findings for a larger sample of 101 countries. We then study the dynamics of growth and persistence in a model where both the depreciation rate and growth are endogenous and procyclical. We find that the model s predictions become consistent with the empirical evidence on persistence, long-term growth and depreciation rates.

Income Taxation and Growth in an OLG Economy: Does Aggregate Uncertainty Play any Role?

We analyze the effects of capital income taxation on long-run growth in a stochastic, two-period overlapping generations economy. Endogenous growth is driven by a positive externality of physical capital in the production sector that makes firms exhibit an aggregate technology in equilibrium. We distinguish between capital income and labor income, and between attitudes towards risk and intertemporal substitution of consumption. We show necessary and sufficient conditions such that i) increments in the capital income taxation lead to higher equilibrium growth rates, and ii) the effect of changes in the capital income tax rate on the equilibrium growth may be of opposite signs in stochastic and in deterministic economies. Such a sign reversal is shown to be more likely depending on i) how the intertemporal elasticity of substitution compares to one, and ii) the size of second- period labor supply. Numerical simulations show that for reasonable values of the intertemporal elasticity of substitution, a sign reversal shows up only for implausibly high values of the second- period’s labor supply. The conclusion is that deterministic OLG economies are a good approximation of the effect of taxes on the equilibrium growth rate as in Smith (1996).

Local and Global Externalities, Environmental Policies and Growth

33 p.

Income tax progressivity, growth, income inequality and welfare

This paper analyzes the effects of personal income tax progressivity on long-run economic growth, income inequality and social welfare. The quantitative implications of income tax progressivity increments are illustrated for the US economy under three main headings: individual effects (reduced labor supply and savings, and increased dispersion of tax rates); aggregate effects (lower GDP growth and lower income inequality); and welfare effects (lower dispersion of consumption across individuals and higher leisure levels, but also lower growth of future consumption). The social discount factor proves to be crucial for this third effect: a higher valuation of future generations' well-being requires a lower level of progressivity. Additionally, if tax revenues are used to provide a public good rather than just being discarded, a higher private valuation of such public goods will also call for a lower level of progressivity.

Foreign Aid Linked to Infrastructure and/or Pollution Abatement

This paper studies the macroeconomic effects of a permanent increase in foreign aid in a model that takes into account environmental quality. We develop a dynamic equilibrium model in which both public investment in infrastructure and environmental protection can be financed using domestic resources and international aid programs. The framework considers four scenarios for international aid: untied aid,aid fully tied to infrastructure, aid fully tied to abatement, and aid equally tied to both types of expenditures. We find that the effects of the transfers may depend on (i) the structural characteristics of the recipient country (the elasticity of substitution in production and its dependence on environment and natural resources) and on (ii) how recipient countries distribute their public expenditure. These results underscore the importance of these factors when deciding how and to what extent to tie aid to infrastructure and/or pollution abatement.

Optimal Taxation and Indeterminacy in the Uzawa-Lucas Model with Sector-specific Externalities

Documento de trabajo

Plastidic Phosphoglucose Isomerase Is an Important Determinant of Starch Accumulation in Mesophyll Cells, Growth, Photosynthetic Capacity, and Biosynthesis of Plastidic Cytokinins in Arabidopsis

Phosphoglucose isomerase (PGI) catalyzes the reversible isomerization of glucose-6-phosphate and fructose-6-phosphate. It is involved in glycolysis and in the regeneration of glucose-6-P molecules in the oxidative pentose phosphate pathway (OPPP). In chloroplasts of illuminated mesophyll cells PGI also connects the Calvin-Benson cycle with the starch biosynthetic pathway. In this work we isolated pgi1-3, a mutant totally lacking pPGI activity as a consequence of aberrant intron splicing of the pPGI encoding gene, PGI1. Starch content in pgi1-3 source leaves was ca. 10-15% of that of wild type (WT) leaves, which was similar to that of leaves of pgi1-2, a T-DNA insertion pPGI null mutant. Starch deficiency of pgi1 leaves could be reverted by the introduction of a sex1 null mutation impeding beta-amylolytic starch breakdown. Although previous studies showed that starch granules of pgi1-2 leaves are restricted to both bundle sheath cells adjacent to the mesophyll and stomata guard cells, microscopy analyses carried out in this work revealed the presence of starch granules in the chloroplasts of pgi1-2 and pgi1-3 mesophyll cells. RT-PCR analyses showed high expression levels of plastidic and extra-plastidic beta-amylase encoding genes in pgi1 leaves, which was accompanied by increased beta-amylase activity. Both pgi1-2 and pgi1-3 mutants displayed slow growth and reduced photosynthetic capacity phenotypes even under continuous light conditions. Metabolic analyses revealed that the adenylate energy charge and the NAD(P) H/NAD(P) ratios in pgi1 leaves were lower than those of WT leaves. These analyses also revealed that the content of plastidic 2-C-methyl-D-erythritol 4-phosphate (MEP)-pathway derived cytokinins (CKs) in pgi1 leaves were exceedingly lower than in WT leaves. Noteworthy, exogenous application of CKs largely reverted the low starch content phenotype of pgi1 leaves. The overall data show that pPGI is an important determinant of photosynthesis, energy status, growth and starch accumulation in mesophyll cells likely as a consequence of its involvement in the production of OPPP/glycolysis intermediates necessary for the synthesis of plastidic MEP-pathway derived hormones such as CKs.