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Christian Groth |
Selected research
publications
Publications and
working papers classified by themes and with summaries
Miscellaneous writings and debate (in Danish)
CV
Selected
research publications
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Do Mincerian Wage Equations Inform How Schooling Influences Productivity? (with Jakub Growiec). WP, June 2017.
Growth or stagnation in pre-industrial Britain? A revealed income growth approach (with Karl Gunnar Persson), University of Warwick WP Series 264-2016.
Medium-term Fluctuations and the "Great Ratios" of Economic Growth (with Jakob B. Madsen), Journal of Macroeconomics, vol. 49, 2016, 149-176. Supplementary Material.
On aggregating human capital across heterogeneous cohorts (with Jakub Growiec), Mathematical Social Sciences, vol. 78, 21-38, 2015.
Embodied learning by investing and speed of convergence,
Journal of Macroeconomics, vol. 40, 245-269, 2014,
http://dx.doi.org/10.1016/j.jmacro.2014.01.009 (with Roland Wendner).
PDF: Sept. 2013.
Supplementary data online.
Optimal growth when environmental quality is a research asset
(with Francesco Ricci),
Research
in Economics
(formerly
Ricerche Economiche), vol. 65, 2011, 340-352.
When economic growth is less than exponential (with K.-J. Koch and T. M. Steger), Economic Theory, vol. 44, no. 2, 2010, 213-242. Errata.
A New-Growth Perspective on Non-renewable Resources. In: Sustainable Resource Use and Economic Dynamics, ed. by L. Bretschger and S. Smulders, Springer (the series The Economics of Non-Market Goods and Resources), Dordrecht, 2007, pp. 127-163.
Growth and Non-renewable Resources: The Different Roles of Capital and Resource Taxes (with P. Schou), Journal of Environmental Economics and Management, vol. 53, no. 1, 80-98, 2007.
Too Little or Too Much R&D? (with Maria Alvarez-Pelaez), European Economic Review, vol. 49, no. 2, 2005, 437-456. Errata. With Mathematical Supplement, PDF.
Strictly Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate, The B.E. Journal of Macroeconomics. Topics. Vol. 4, no. 1, 2004, 1-13. Errata.
Profitable Unproductive Innovations (with Maria Pelaez-Alvarez), CentrA Working Paper Series E 2003/42, April 2003.
Can Non-Renewable Resources Alleviate the Knife-edge Character of Endogenous Growth? (with Poul Schou), Oxford Economic Papers, vol. 54, no. 3, July 2002, 386-411. With separate mathematical Supplement available at: http://oep.oxfordjournals.org/content/vol54/issue3/index.dtl
Some Unfamiliar Dynamics of a Familiar Macro Model: A Note, Journal of Economics, vol. 58, 1993, 293-305.
Endogen teknologisk udvikling,
Nationaløkonomisk Tidsskrift (Danish Journal
of Economics), årg. 130, nr. 2, 1992, 350-359.
Strange Attractors and
Endogenous Business Cycle Theory: Comment.
In: Business Cycles: Theories, Evidence and Analysis. Proceedings of a
Conference held by the International Economic Association, ed. by N. Thygesen,
K. Velupillai and S. Zambelli, London 1991, pp.
200-204.
IS-LM Dynamics and
the Hypothesis of Combined Adaptive-forwardlooking Expectations. In: P.
Flaschel and M. Krüger, eds., Recent
Approaches to Economic Dynamics. Verlag Peter
Lang, Frankfurt a/M 1988, pp. 251-66.
Research
publications and working papers classified by themes
and with summaries
My
research can be divided into four categories:
A.
Economic growth and technological change
B.
Natural resources and economic
growth
C.
Business cycle theory
D.
Fiscal policy
A.
Economic growth and technological change
Do Mincerian Wage Equations Inform How Schooling Influences Productivity?
(with Jakub Growiec). WP, June 2017.
Summary:
Based on a stylized Mincerian general equilibrium model with imperfect
substitutability across skill types and ex ante identical workers,
we provide a theoretical argument why the cross-sectional relationship
between wages and years of schooling may not convey any information on the
underlying human capital production function. We show that identification of
the human capital production function, measuring how schooling influences
productivity, should take into account the equilibrium allocation of
individuals across skill types.
Growth
or stagnation in pre-industrial Britain? A revealed income growth
approach, University of Warwick WP Series 264-2016; with Karl Gunnar Persson.
Summary:
The extent of growth in
pre-industrial Europe in general and in Britain in particular has attracted
intense scholarly focus. Growth or Malthusian stagnation? No consensus has
evolved. Reconstructions of national income from 1300 and up to the
Industrial Revolution come to opposing conclusions and so do econometric
studies. Applying Engels’ law, we suggest a new approach in which income
growth is revealed by changes in occupational structure.
Data needed for this approach are less contested than the wage and
output series used in the existing literature. We find that pre-industrial
Britain exhibited secular rise in the standard of living.
On
aggregating human capital across heterogeneous cohorts (with Jakub Growiec),
Mathematical Social Sciences, vol. 78, 21-38, 2015.
Summary:
This paper studies the question: Can
the microeconomic Mincerian (log-linear) functional relationship between
human capital, years of schooling and work experience be recovered in some
similar form at the macroeconomic level? A large macroeconomic literature
assumes so, warranting that the question is of interest. We first examine
the question at a theoretical level and find that except under very special
assumptions, the answer is in the negative. On the other hand, we also show
numerically that a macro-Mincer relationship can nevertheless be perceived
as a quantitatively reasonable approximation of the theoretically derived
‘‘true’’ relationship, at least if the observed heterogeneity comes only
from differences in the number of years of schooling, retirement age, or
demographic survival laws.
Embodied learning by investing and speed of convergence,
Journal of Macroeconomics, vol. 40, 245-269, 2014,
http://dx.doi.org/10.1016/j.jmacro.2014.01.009 (with Roland Wendner).
PDF: Sept. 2013.
Supplementary data online.
Summary:
We study transitional dynamics and speed of convergence in economic
growth.
Based on a canonical framework the analysis revisits both "old" and "new"
growth literature along three dimensions: (i) What if growth is not
exogenous but endogenous and driven by learning by doing? (ii) What if
technical progress is embodied rather than disembodied? And (iii) what if
the vehicle of learning is gross investment as in the Arrowian tradition
rather than net investment as in most recent contributions? From both a
theoretical and a quantitative point of view we show that the speed of
convergence (both asymptotically and in a finite distance from the steady
state) depends
strongly and negatively on the importance of learning in the growth engine
and on gross investment being the vehicle of learning rather than net
investment. And contrary to a presumption from "old growth theory", a rising
degree of embodiment in the wake of the computer revolution is not
likely to raise the speed of convergence when learning by investing is the
driving force of productivity increases.
Keywords: Transitional
dynamics; speed of convergence; learning by investing; embodied technological
progress; decomposable dynamics.
When economic growth is less than exponential,
Economic Theory vol.
44, 2010, 213-242 (with K.-J. Koch and T. M. Steger).
Errata.
Summary:
This paper argues that growth theory needs a more general notion of "regularity"
than that of exponential growth. We suggest that paths along which the rate of
decline of the growth rate is proportional to the growth rate itself deserve
attention. This opens up for considering a richer set of parameter combinations
than in standard growth models. And it avoids the usual oversimplistic dichotomy
of either exponential growth or stagnation. By allowing zero population growth
in three different growth models (the Jones R&D-based model, a learning-by-doing
model, and an embodied technical change model), we are able to show how a
continuum of "regular" or "quasi-arithmetic" growth processes fill the whole
range between exponential growth and complete stagnation. The previous
literature did not lead to any clearcut conclusions for the case of zero
population growth.
Keywords:
Quasi-arithmetic growth;
Regular growth;
Semi-endogenous growth;
Knife-edge restrictions;
Learning by doing;
Embodied technical change.
Too Little
or Too Much R&D?, European Economic Review, vol. 49, no. 2, 2005,
437-456 (with Maria Alvarez-Pelaez).
Errata. With Mathematical Supplement,
PDF.
Summary: According to first-generation models of endogenous growth based
on expanding product variety, the market economy unambiguously generates too
little R&D. Later, by disentangling returns to specialization from the market
power parameter, it was shown that with sufficiently low returns to
specialization too much R&D can occur. The present paper takes a step further,
disentangling the market power parameter from the capital share in final output.
This disentangling of arbitrarily identified parameters turns out to help
finding too much R&D as well.
The paper further shows that absence
of this disentangling blurs the positive effect on the incentive to innovate of
an increase in the monopolist markup. Moreover, by differentiating between net
and gross returns to specialization it is demonstrated what drives the differing
inefficiency results in the literature. The decisive factor behind excessive R&D
is the implicit presence of negative externalities of increased specialization.
Empirically, an advantage of the more general framework is better agreement with
the observed level of markups and the observed falling tendency of the
patent/R&D ratio.
Keywords:
Endogenous growth; R&D; Expanding product variety; Creative destruction; Optimal
growth.
Innovation and Growth: What Have We Learnt From the Robustness Debate? Discussion Papers no. 04-29, Dept. of Econ., University of Copenhagen, November 2004.
Profitable Unproductive Innovations, CentrA Working Paper Series E 2003/42, April 2003 (with Maria Pelaez-Alvarez).
Growth with Public Research and Private Education, Institute of Economics, University of Copenhagen Discussion Papers No. 95-20, 1995.
Endogen teknologisk udvikling,
Nationaløkonomisk Tidsskrift (Danish Journal
of Economics), årg. 130, nr. 2, 1992, 350-359.
In Danish with an English summary.
The paper discusses basic ideas in Paul Romer's R&D model of endogenous
exponential growth (JPE, 1990). Notable implications of extending the model by allowing for
population growth and decreasing marginal productivity of knowledge in the
creation of new knowledge are
considered. This leads to the distinction between "strictly endogenous growth" and "weakly
endogenous growth", corresponding to what later became known
as "fully-endogenous growth" and "semi-endogenous growth",
respectively.
Different Indecomposability Concepts for a von Neumann Technology: A Note,
Metroeconomica, vol. 37, no. 2, 1986, 157-166.
B.
Natural resources and economic growth
Optimal growth when environmental quality is a research asset,
Research
in Economics
(formerly
Ricerche Economiche), vol. 65, 2011, 340-352
(with Francesco Ricci).
Summary: We advance the hypothesis that a good state of the
environment positively affects labor productivity in R&D such that
deteriorating environmental quality impacts R&D negatively. We study the
implications of this assumption for the optimal solution in an R&D-based
model of growth, where the use of a non-renewable resource generates
pollution. In such a case, it is socially optimal to postpone extraction, as
opposed to the situation in which the environment has no effect on
productivity in R&D. Furthermore, insofar as environmental quality declines
and subsequently recovers, it is optimal to re-allocate employment to R&D in
line with productivity changes. If environmental quality recovers only
partially from pollution, R&D effort optimally begins above its long-run
level, then progressively declines to a minimum and eventually increases to
its steady-state level.
Keywords: Endogenous
growth; non-renewable resources; environmental quality; environmental
hysteresis.
Growth and Non-renewable Resources: The Different
Roles of Capital and Resource Taxes, Journal of Environmental Economics
and Management, vol. 53, no. 1, 80-98, 2007 (with P. Schou).
Summary: We contrast effects of taxing non-renewable resources with
the effects of traditional capital taxes and investment subsidies in an
endogenous growth model. In a simple framework we demonstrate that when
non-renewable resources are a necessary input in the sector where growth is
ultimately generated, interest income taxes and investment subsidies can no
longer affect the long-run growth rate, whereas resource tax instruments are
decisive for growth.
The results stand out both against observations in the literature from the
1970's on non-renewable resources and taxation - observations which were not
based on general equilibrium considerations - and against the general view
in the newer literature on taxes and endogenous growth which ignores the
role of non-renewable resources in the "growth engine".
Keywords: Non-renewable
resources; endogenous growth; capital taxation; resource taxation; carbon
taxes; climate change; optimal taxation.
A New-Growth Perspective on Non-renewable Resources. In:
Sustainable Resource
Use and Economic Dynamics, ed. by L. Bretschger and S. Smulders, Springer
(the series The Economics of Non-Market Goods and Resources), Dordrecht,
2007, pp. 127-163.
Summary:
Within a unified
framework this survey reviews issues related to the incorporation of
scarce natural resources in the theory of economic growth and development.
The focus is on the role of non-renewable resources and the theme of limits
to growth. The first sections portray the waves of natural resource
economics of the 1970s and so-called New Growth Theory from the 1990s. In
the next sections formal one- and two-sector growth models with
non-renewable resources and endogenous technological change are set up and
discussed. The analysis lays bare the key role of the distinction between
resources that are growth-essential and resources that are not.
The former case arises when for instance not only labor
but also capital is an input in R&D. Then a non-renewable resource which is
a necessary input in the capital-producing sector, is indirectly a necessary
input also for the R&D sector. This affects the conclusions in important
ways: more narrow limits to growth arise; the scope for various policy tools
changes; no knife-edge condition is any longer needed for fully endogenous
growth; there is no scale effect on growth; and population growth can easily
be integrated.
Keywords: Endogenous growth;
innovation; non-renewable resources; knife-edge conditions; robustness;
limits to growth.
Growth-essential non-renewable resources and limits to growth, paper
presented at the "Environment, Innovation and Performance Conference", Grenoble,
June 04-06, 2007.
Summary:
The standard approach to modelling endogenous technical
change in an economy with an essential non-renewable resource ignores that
also R&D may need the resource (directly or indirectly). This biases the
limits-to-growth discussion in an optimistic direction. Indeed, sustained
per capita growth requires stronger parameter restrictions when the resource
is directly or indirectly an input in R&D and thus "growth essential" than
when it is not. When the resource is “growth essential”, a policy aiming at
stimulating long-run growth generally has to reduce the long-run depletion
rate. In this sense promoting long-run growth and "supporting the
environment" go hand in hand.
Keywords: Endogenous growth;
innovation; non-renewable resources; knife-edge conditions; robustness;
limits to growth.
Strictly
Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate,
The B.E. Journal of Macroeconomics. Topics. Vol. 4, no. 1, 2004, 1-13. Errata.
Summary: Conventional endogenous growth theory relies on the
assumption of constant returns to "broad capital". As Solow pointed out, the
strength of this assumption is revealed by recognizing that even the
slightest touch of increasing returns creates explosive growth: infinite
output in finite time! But Solow's observation ignored natural resources.
What happens if non-renewable resources enter the "growth engine"? In this
case (strictly) endogenous growth requires the technology to be such that
there is no upper bound on the sustainable per capita growth rate. This
corroborates Solow's scepticism.
Keywords: Endogenous growth;
semi-endogenous growth, non-renewable resources, knife-edge.
Can Non-Renewable
Resources Alleviate the Knife-edge Character of Endogenous Growth? Oxford
Economic Papers, vol. 54, no. 3, July 2002, 386-411 (with Poul Schou). With
separate mathematical Supplement available at:
http://oep.oxfordjournals.org/content/vol54/issue3/index.dtl
Summary: Standard endogenous growth models rely on the arbitrary
assumption that the technology has exactly constant returns with respect to
producible inputs. Can this knife-edge restriction be relaxed by including
non-renewable resources as necessary inputs in production? In a one-sector
optimal growth model, we find that the strain on the economy imposed by the
need to extract successively smaller amounts of the non-renewable resource
can offset the potentially explosive effects of allowing for increasing
returns to producible inputs. However, growth in per capita consumption will
be unstable unless there is population growth. Thus, the knife-edge problem
of (strictly) endogenous growth reappears as an instability problem. But a
"semi-endogenous" growth framework turns out to be an attractive
alternative, relying on less restrictive parameter values, maintaining
stability, and allowing a rich set of determinants of long-run growth.
Keywords: Endogenous growth;
semi-endogenous growth; knife-edge problem; non-renewable resources;
robustness.
Medium-term Fluctuations and the "Great Ratios" of Economic Growth
(with Jakob B. Madsen), Journal of Macroeconomics,
vol. 49, 2016, 149-176.
Supplementary Material.
Summary: Evidence for the OECD countries
show that the “great ratios”, such as the unemployment rate, factor shares,
Tobin’s q and the investment-capital ratio, fluctuate significantly
on medium-term frequencies of 10-40 years duration. To explain these medium-term fluctuations, we establish a
macro-dynamic model where the q-theory of investment is combined with
sluggish real-wage adjustment in the labour market. For plausible values of the elasticity of factor
substitution real wage sluggishness creates damped internal
oscillations in the endogenous variables. Thereby hump-shaped responses to a
variety of shocks arise.
Key words: Medium-term cycles; Tobin's q: real-wage
Phillips curve; elasticity of factor substitution; endogenous oscillations.
Highlights:
·
We extend
the
Tobin’s q model of Abel and Blanchard (1983) by allowing
unemployment due to sluggish real-wage adjustment in the labour market.
·
Thereby the fluctuations in aggregate activity reflect fluctuations in the
unemployment rate rather than in labour supply as in standard RBC theory,
·
For plausible values of the elasticity of factor substitution, real wage
sluggishness creates damped internal oscillations in the endogenous
variables. Thereby hump-shaped responses to a variety of shocks arise.
·
This possibility of internal oscillations challenges the claim by Kydland
and Prescott (1990) that “cyclical laws of motion do not arise … for
economies with reasonable statements of people’s ability and willingness to
substitute”.
·
A higher degree of convexity in capital adjustment costs increases the
period length while increased sluggishness in real-wage adjustment amplifies
employment fluctuations.
·
In response to productivity shocks Tobin’s q and investment lead
fluctuations in employment and output, while real wages are lagging.
Some Unfamiliar Dynamics of a Familiar Macro Model: A Note,
Journal of Economics, vol. 58, 1993,
293-305.
Summary: In the 1970s, the Keynesian-Monetarist dynamic IS-LM model with
expectations-augmented Phillips curve, adaptive inflation expectations, and
passive ("monetarist") monetary policy was studied intensively. It was shown
that the model features a locally asymptotically stable full-employment
steady state if and only if the so-called Cagan condition is satisfied. This
stability result became conventional wisdom of mainstream macroeconomics as
presented in many intermediate textbooks in the 1980s and 1990s (sometimes even
without mentioning its dependence on the Cagan condition).
There is, however, a serious hole in
the theory. This derives from the lack of attention to the zero lower bound on
the nominal interest rate which implies an inherent non-linearity in the
economy. Therefore, local asymptotic stability does not imply global asymptotic
stability. This paper shows that even under the Cagan condition, if the
full-employment steady state is disturbed by a large adverse demand shock, a
self-reinforcing
deflationary
spiral arises bringing the economy further and further
below full employment. This result about a "dynamic liquidity trap"
underpins, at the theoretical level, Leijonhufvud's "corridor" hypothesis
(Leijonhufvud, 1973).
Keywords:
IS-LM dynamics; Global dynamics; Corridor; Deflationary spiral; Liquidity trap.
Strange Attractors and
Endogenous Business Cycle Theory: Comment.
In: Business Cycles: Theories, Evidence and Analysis. Proceedings of a
Conference held by the International Economic Association, ed. by N. Thygesen,
K. Velupillai and S. Zambelli, London 1991, pp.
200-204.
IS-LM Dynamics and
the Hypothesis of Combined Adaptive-forwardlooking Expectations. In: P.
Flaschel and M. Krüger, eds., Recent
Approaches to Economic Dynamics. Verlag Peter
Lang, Frankfurt a/M 1988, pp. 251-66.
Lecture note on Long-run aspects of fiscal policy and public debt (chapter draft for a macroeconomics text in the pipeline, Sept. 2016).
Short- and long-run aspects of fiscal policy in a deep recession. A note, February 2011, revised May 2012.
Growth and Non-renewable Resources: The Different
Roles of Capital and Resource Taxes, Journal of Environmental Economics
and Management, vol. 53, no. 1, 80-98, 2007 (with P. Schou).
Summary: We contrast effects of taxing non-renewable resources with
the effects of traditional capital taxes and investment subsidies in an
endogenous growth model. In a simple framework we demonstrate that when
non-renewable resources are a necessary input in the growth-generating sector, interest income taxes and investment subsidies can no
longer affect the long-run growth rate, whereas resource tax instruments are
decisive for growth.
The results stand out both against observations in the literature from the
1970's on non-renewable resources and taxation - observations which were not
based on general equilibrium considerations - and against the general view
in the newer literature on taxes and endogenous growth which ignores the
role of non-renewable resources in the "growth engine".
Keywords: Non-renewable
resources; endogenous growth; capital taxation; resource taxation; carbon
taxes; climate change; optimal taxation.
Growth with Public Research and Private Education, Institute of Economics, University of Copenhagen Discussion Papers No. 95-20, 1995.
IN DANISH:
Debatten om stabilitets- og vækstpagten, Samfundsøkonomen, 2008, nr.1, 42-48. Erratum
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Lecture notes and class exercises:
Recent courses and
Archive.
Chronological complete lists of research publications, working papers
and other writings
(as of May 2012)
CV (as
of Sept. 2012)