Fertility rates have declined dramatically across almost all high-income countries over the past decades. In some countries, population growth is already negative and many more are projected to exhibit negative population growth in the coming decades. This has raised concerns about future economic prospects. Indeed, fully–endogenous and semi–endogenous growth models imply that a shrinking workforce would lead to declining income growth and, perhaps, even to stagnation. We include an endogenous quantity/quality trade-off between fertility and human capital accumulation in these models to assess the extent to which a declining number of people (i.e., workers) may be compensated by increasing education. We demonstrate that economic growth does not necessarily decline with population shrinkage: in many scenarios, human capital investment can offset demographic headwinds and sustain technological progress.

Building on Lucas (1988) and Boucekkine et al. (2013), we develop a model in which the impact of population dynamics on per capita GDP and human capital depends on the balance of intertemporal altruism effects toward future generations and class-size effects on an individual’s education investment. We show that there is a critical level of the class-size effects that determines whether a decline in population growth will lead to a decrease or an increase in a country’s long-run growth rate of real per capita income. We take the model to OECD data, using a semi-parametric technique. This allows us to classify countries into groups based on their long-term growth trajectories, revealing patterns not captured by previous studies on the topic.

Financial literacy has gained momentum in the policy arena and several countries are currently promoting it. Despite the undeniable importance of financial literacy in improving the allocation of savings across alternative uses, the impact of these policies on economic growth is not obvious. Indeed, financial literacy is a specialized form of human capital, thus favoring financial education may deter general education eventually generating detrimental effects on growth. This paper relies on an endogenous growth framework where human capital can be employed to accumulate financial literacy to assess the conditions under which the current policy setting may be beneficial in the long run. Our calibration based on the US economy over the 1950-2019 period shows that this may effectively be the case if the impact of financial literacy on the allocational efficiency of the financial sector is sufficiently strong.

Leisure generates externalities for the economy as a whole, as individuals generally get some (dis-)utility from their leisure-time. However, the sign and the extent of the effect that these externalities have on a specific worker's productivity and on the productivity of all other factors used in combination with labor (hence on long-term economic growth) may be asymmetric across different economic activities. The objective of this paper is to shed light on the impact that sector-specific leisure-time externalities have on the innovation rate, on the sectorial allocation of (skilled) labor, and eventually on the long-run economic growth rate, without making any prior assumption on their sign and magnitude. In the baseline model the growth rate of per capita income moves together with all types of leisure externalities, whereas the innovation rate moves together with (and depends solely on) the R&D-sector-specific leisure externality. From numerical analyses, we conclude that sector-specific leisure-time externalities provide asymmetric effects on the growth rate of real per capita GDP and on the way skilled labor is allocated across different economic activities. The robustness of these conclusions is analyzed by using various definitions of leisure along with different utility functions (including leisure as an argument).

We analyze the role that human capital plays in driving the non-monotonic relation between economic growth and financial development. At this aim we build a theoretical model of endogenous growth in which the nature of the growth and finance nexus is nonlinear and actually depends on the educational level, which ultimately determines the way through which financial development affects both the productivity and the depreciation of human capital. The dependence of the non-monotonic (i.e., bell-shaped) growth and finance nexus on human capital suggests that there may exist a threshold education level beyond which the sign of the relation changes. We econometrically test such a theoretical prediction in a rich and large data set comprising a cross-section of 133 countries over the period 1970-2011. We rely on the GMM instrumental variable approach to address endogeneity issues, and we consider a large number of control variables. After performing a number of robustness checks, all our results are consistent with the view that human capital helps to explain the nonlinear relationship between finance and growth. In particular, we find support for our theoretical model’s conclusion that financial development may be harmful to economic growth in countries that already have high levels of education, while it may be beneficial in those countries in which human capital is less abundant.

We analyze a network-based macroeconomic framework with the objective to analyze the effects that endogenous migration choices may have on the mutual relation between population dynamics and capital accumulation. In our economy population size determines the labor input which, together with the available capital stock, shapes total output. Production takes place with a convex-concave technology allowing for a poverty trap. Migration depends on the origin-destination income differential and affects the fertility rate. Thus population growth ultimately turns out to be endogenously dependent upon economic conditions. Such feedback effects between population and capital dynamics give rise to possible heterogeneity in the patterns of economic development, allowing to explain the large variability in the level of development between regions we generally observe at world level. We show that a higher degree of economic interaction improves economic outcomes at global level by allowing poor economies to escape their poverty trap, suggesting thus that promoting the formation of tight relations between countries may be an important policy option to favor economic development.

Evidence suggests that fertility rates are already below the replacement level in many advanced countries, meaning that population is decreasing in these regions. We build an R&D-based growth model with human capital and declining population to show that the introduction of human capital can mitigate (or overcome) the stagnation in GDP per capita that may otherwise occur. Also, our model allows us simultaneously to observe sustained economic growth combined with secular productivity stagnation.(c) 2023 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

To better understand the long-term consequences and the possible channels (mainly, technological progress and human capital accumulation) through which a declining population may eventually sustain long-run economic growth and innovation in advanced economies, we build an endogenous, non-scale growth model with horizontal R&D activity and human capital investment. Population growth and per capita human capital accumulation are linked to each other by means of what in the paper is identified as the ‘multiplicative effect’ of population. As long as the strength of this effect exceeds a given positive threshold, population growth and per-capita income growth can be negatively correlated. This means that a negative rate of population growth can sustain a positive economic growth rate in the long run.

The multilinear PageRank model [Gleich et al., SIAM J Matrix Anal Appl, 2015;36(4):1507-41] is a tensor-based generalization of the PageRank model. Its computation requires solving a system of polynomial equations that contains a parameter alpha is an element of[0,1). For alpha approximate to 1, this computation remains a challenging problem, especially since the solution may be nonunique. Extrapolation strategies that start from smaller values of alpha and "follow" the solution by slowly increasing this parameter have been suggested; however, there are known cases where these strategies fail, because a globally continuous solution curve cannot be defined as a function of alpha. In this article, we improve on this idea, by employing a predictor-corrector continuation algorithm based on a more general representation of the solutions as a curve in Double-struck capital Rn+1. We prove several global properties of this curve that ensure the good behavior of the algorithm, and we show in our numerical experiments that this method is significantly more reliable than the existing alternatives.

In this paper we try to investigate, under weak spillover effects in the R&D sector, whether leisure time can act as an externality that promotes innovation. More specifically, we set up and test a horizontal R&D-based growth model with endogenous labor supply where leisure time may enhance inventors' productivity and therefore have (under specific conditions) positive long run effects on the accumulation of new disembodied knowledge. Our main result in the theoretical model which is confirmed empirically is that leisure time can be beneficial for innovation in situations where there are weak spillovers arising from past ideas in the invention of new ones.

The latest crises (the financial crisis of 2007/2008 and the more recent COVID-19 epidemic) have revitalized a long-lasting debate among economists: How should our target-economy look like? Which levers can a policy-maker use to reach the targeted economy? Can innovation be one of these levers? If yes, how can innovation be a major engine of long-term economic growth without, at the same time, exacerbating social inequality? What are the main implications of innovation for globalization, employment, health and human happiness? What is the role that a ‘‘State’’ can play in all this? In a word: What is the future of capitalism, and how can we ultimately re-shape it? These are the crucial questions that Aghion, Antonin and Bunel (A–A–B, hereafter) try to answer in their impressive book that encompasses more than thirty years of active research in the fields of economic theory and innovation–driven growth. Answering these questions requires the use of a fundamental paradigm (or framework of analysis), and the one that A–A–B decide to employ is the Schumpeter’s ‘Creative Destruction’ model. The reason for this is easy to understand as long as one remembers that according to Schumpeter (1942, Chapter VII):

Over the past decades, research effort in high income countries has substantially increased. Meanwhile, the growth rates of per capita output have been rather stable. The contribution of this paper is twofold. The first is to provide a theoretical explanation for such trends by developing an R&D-based growth model which accounts for dilution, difficulty and duplication effects. The second is to show empirically that the occurrence of different phases in the economic growth dynamics traces back to the interplay between complexity and specialization in production. To do this we estimate a Hidden Markov Model in which countries can switch across different growth regimes. We identify four distinct growth regimes.

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This paper studies the empirical relationship between population's health and real GDP dynamics in low- and middle-income countries. We employ a semi-parametric technique, which combines mixed panel data models and cluster analysis to account for unobserved heterogeneity, an important source of estimation bias in growth regressions. We estimate a version of the Solow growth model augmented with human capital, in the form of both education and health. Our estimates show that population s health, here proxied by the life expectancy at birth, has a positive, sizable, and statistically significant effect on both the level and the growth rate of the real per capita GDP.

We analyze the simplest possible model of endogenous growth to account for the role of financial development. In our setting, financial development affects productivity and determines the amount of resources subtracted to capital investment. We show that under very general assumptions, the relation between economic growth and financial depth is nonmonotonic, and eventually bell-shaped. We empirically assess our results in a framework that allows to distinguish between long-run and short-run effects. We establish a cointegrating relation and derive the long-run elasticities of per capita gross domestic product (GDP) with respect to employment, the physical capital stock, and financial depth–relying on linear as well as nonlinear models for the finance-growth nexus. We employ the results of the first step estimation to specify an error–correction model and find that there is strong evidence for a nonlinear relationship between financial depth and per capita GDP, consistently with what was predicted by our theoretical model.

To reconcile the predictions of research and development (R&D)-based growth theory regarding the impact of population growth on productivity growth with the available empirical evidence, we propose a tractable, continuous-time, multisector, R&D-based growth model with endogenous education and endogenous fertility. As long as the human capital dilution effect is sufficiently weak, faster population growth may lead to faster aggregate human capital accumulation, to faster technological progress, and, thus, to a higher growth rate of productivity. By contrast, when the human capital dilution effect becomes sufficiently strong, faster population growth slows down aggregate human capital accumulation, dampens the rate of technical change, and, thus, reduces productivity growth. Therefore, the model can account for the possibly negative correlation between population growth and productivity growth in R&D-based growth models depending on the strength of the human capital dilution effect.

Using a one-sector, discrete-time Ramsey model, we analyze and compare the implications for welfare, capital accumulation, and speed of convergence to the steady state of two classes of utility functions that represent Gorman preferences, namely homothetic and Stone–Geary preferences. For identical economies, we show that the preference structure does not affect only the capital dynamics and social welfare but also the speed of convergence to the steady-state equilibrium.

This study uses fixed-effect regressions estimated with heteroskedasticity-consistent standard errors to investigate the effect of international diversification on corporate cash holding behavior of French-listed firms during economic downturns. The findings show that internationally diversified firms are less inclined to save cash out of their cash flows than their undiversified counterparts. However, during economic downturns, the relationship shifts and shows that international diversification is positively associated with the propensity of firms to save cash out of their cash flows. The negative relationship between international diversification and the propensity of firms to save cash out of their cash flows suggests that risk-reducing effects coupled with easy access to external finance prevail over the high agency costs and information asymmetry associated with international companies. However, during economic slumps, this relationship becomes positive, highlighting a significant influence of the financial crisis on internationally diversified firms relative to their stand-alone counterparts. Thus, this study should provide useful insights for academics, practitioners as well as financial regulators.

We analyze the effects of children's health on human capital accumulation and on long-run economic growth. For this purpose, we design an R&D-based growth model in which the stock of human capital of the next generation is determined by parental education and health investments. We show that (i) there is a complementarity between education and health: if parents want to have better educated children, they also raise health investments and vice versa; (ii) parental health investments exert an unambiguously positive effect on long-run economic growth, (iii) faster population growth reduces long-run economic growth. These results are consistent with the empirical evidence for modern economies in the twentieth century.

We provide aggregate macroeconomic evidence on how, in the long run, a diverse degree of complexity in production may affect not only the rate of economic growth, but also the correlation between the latter, population growth and the monopolistic (intermediate) markups. For a sample of Organisation for Economic Co-operation and Development (OECD) countries, we find that the impact of population change on economic growth is slightly positive. According to our theoretical model, this implies that the losses due to more complexity in production are lower than the corresponding specialization gains. Using a finite mixture model, we also classify the countries in the sample and verify for each cluster the impact that the population growth rate and the intermediate sector’s markups exert on the 5-year average real gross domestic product (GDP) growth rate.