Autor: Steve De Castro

WP 89 Piketty’s Prediction meets technical progress in Harrod-Domar’s Dynamics and Solow-Swan’s Surrogate

Abstract – Thomas Piketty [2014] uses mainly UN projections that the world GDP growth rate g can fall by half in 2010-2100, to predict that the capital or wealth share in world national income, αK, may double. This prediction for αK contradicts at least one of Kaldor’s stylized facts and possibly the Kuznets curve. Negating somewhat this prognosis, we show here formally, that exogenous technical progress can vary the αK trajectories in either direction, even with the saving rate, s, held constant. Further, we show how s can be used not only to stabilize αK but also to allow GDP growth g to accompany its only true engine, technical progress. Like Piketty, we use the Solow-Swan model and ignore the recent literature which, since about 1985, tries to make endogenous this mother lode of growth. Finally, the paper suggests that the policy recommendation of this literature, for the great majority of the world’s population, should continue to emphasize growth in per capita GDP, at least while the gap with the rich economies is so wide. The issue remains income distribution, not the ones within each economy, Piketty’s contribution, but rather the one across them all. Download do Paper Ano: 2015 Working-paper: WP 089 Steve De Castro Ler todos os Posts de Steve De Castro’s Share...

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WP 88 Incentive theory for the transition from Atlantic slave plantations to firms and labor markets

Abstract – The reallocation of property rights at the transition from slavery to free labor in Brazil, the US South, Jamaica, among others, were often followed by stagnation and even falls in GDP per capita. One theory for the higher productivity of slaves claims it was the coercion available to slave-owners and not to employers. A second argues that plantations were using various incentives to induce it – more food, time-off etc. Loss of scale at abolition is the implied theory. In this paper, some recent theories of the firm are used to study the incentive mechanisms when effort at multiple tasks must be supervised. A principal-agent model is used to show how wrong incentives after abolition could have induced former slaves to produce more peasant crops relative to the plantation staples which yielded more GDP. If at the transition to free workers there is no technical progress or changes in product prices, plantations may become unviable and the economy can collapse into lower-productivity family farms or worse. An exception to this argument is the “gold rush” outcome where the pulverized activity is so lucrative that growth can occur without hierarchical production structures. In the absence of such windfalls, agents may resort to less efficient, incentive-compatible mechanisms akin to sharecropping, tenancy and marginal-product wage labor which do not need the supervision which firms provide. Download do Paper Ano: 2015 Working-paper:...

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WP 89 Piketty’s Prediction meets technical progress in Harrod-Domar’s Dynamics and Solow-Swan’s Surrogate

Abstract – Thomas Piketty [2014] uses mainly UN projections that the world GDP growth rate g can fall by half in 2010-2100, to predict that the capital or wealth share in world national income, αK, may double. This prediction for αK contradicts at least one of Kaldor’s stylized facts and possibly the Kuznets curve. Negating somewhat this prognosis, we show here formally, that exogenous technical progress can vary the αK trajectories in either direction, even with the saving rate, s, held constant. Further, we show how s can be used not only to stabilize αK but also to allow GDP growth g to accompany its only true engine, technical progress. Like Piketty, we use the Solow-Swan model and ignore the recent literature which, since about 1985, tries to make endogenous this mother lode of growth. Finally, the paper suggests that the policy recommendation of this literature, for the great majority of the world’s population, should continue to emphasize growth in per capita GDP, at least while the gap with the rich economies is so wide. The issue remains income distribution, not the ones within each economy, Piketty’s contribution, but rather the one across them all. Download do Paper Ano: 2015 Working-paper: Steve De Castro Ler todos os Posts de Steve De Castro’s Share...

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