The spirit of capitalism, innovation and long-run growth

Shi, Bowen and Wang, Gaowang and Zou, Heng-fu (2019): The spirit of capitalism, innovation and long-run growth.

Abstract

We develop an endogenous growth model incorporating the spirit of capitalism and examine how it influences innovation and economic growth. In the benchmark homogeneous-ability model, we find that the spirit of capitalism increases both the capital accumulation rate by enhancing consumer patience and the knowledge accumulation rate by reallocating human capital from the final goods sector to the R&D sector, both of which drive the endogenous growth of the macroeconomy. In the extended heterogeneous-ability model, we identify an additional channel through which the spirit of capitalism boosts innovation and economic growth: by lowering the shreshold ability required to become an entrepreneur and increasing the amount of human capital working in the R&D sector.

• Item Type: MPRA Paper
• Language: English
• Keywords: The spirit of capitalism; innovations; endogenous growth; heterogeneous ability
• Subjects: E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

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