Romer Meets Weber-Schumpeter: The Spirit of Capitalism, Entrepreneurial Drive and Long-Run Growth

Wang, Gaowang and Zou, Heng-fu (2025): Romer Meets Weber-Schumpeter: The Spirit of Capitalism, Entrepreneurial Drive and Long-Run Growth.

Abstract

In this article, we develop a growth theory by integrating the Weber-Schumpeterian spirit of capitalism into Romer's (1990) model of endogenous technological change. The spirit of capitalism influences innovation and long-run growth through capital accumulation and the reallocation of human capital, mediated by a price mechanism. It also helps prevent economic stagnation arising from a limited stock of human capital. Explicit solutions illustrate the qualitative effects of the spirit of capitalism on growth. Using calibrated parameters based on U.S. data, we find this effect is quantitatively significant, accounting for more than half of U.S. long-run growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Weber's Spirit of Capitalism; Schumpeter's entrepreneurial psychology; Endogenous Growth; Economic Stagnation; 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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