A paradigm is presented where both the extent of financial intermediation and the rate of economic growth are endogenously determined. Financial intermediation promotes growth because it allows a higher rate of return to be earned on capital, and growth in turn provides the means to implement...

One usually accounts for output growth in terms of the growth of the primary inputs: labor, physical capital, and possibly human capital. In this paper we account for growth with labor and with intermediate goods. Because we have no measures of the extent of adoption of most intermediate goods...

Growth theory offers two plausible explanations of growth. One stresses the supply of productive ideas and holds that the industrial revolution had to wait until we had thought up enough inventions to lift us into the era of modern growth. It says, roughly, that the growth of living standards...

Machines are more expensive in poor countries, and the relation is pronounced. It is hard for a Solow (1956) type of model to explain the relation between machine prices and GDP given that in most countries equipment investment is under 10% of GDP. A stronger relation emerges in a Solow (1959)...

Chamley (1986) and Judd (1985) showed that, in a standard neoclassical growth model with capital accumulation and infinitely lived agents, either taxing or subsidizing capital cannot be optimal in the steady state. In this paper, we introduce innovation-led growth into the Chamley-Judd...

Schumpeterian growth theory has "operationalized" Schumpeter''s notion of creative destruction by developing models based on this concept. These models shed light on several aspects of the growth process which could not be properly addressed by alternative theories. In this survey, we focus on...

"Is inequality largely the result of the Industrial Revolution? Or, were pre-industrial incomes and life expectancies as unequal as they are today? For want of sufficient data, these questions have not yet been answered. This paper infers inequality for 14 ancient, pre-industrial societies using...

Is inequality largely the result of the Industrial Revolution? Or, were pre-industrial incomes and life expectancies as unequal as they are today? For want of sufficient data, these questions have not yet been answered. This paper infers inequality for 14 ancient, pre-industrial societies using...

This paper models the product cycle and explains how it relates to world inequality. In the model, both phenomena arise because skilled people have a comparative advantage in making high-tech products. The model can explain up to a 10:1 income differential between people and up to a 7:1...

The world economy has become more unequal over the last two centuries. Since within- country inequality exhibits no ubiquitous trend, it follows that virtually all of the observed rise in world income inequality has been driven by widening gaps between nations, while almost none of it has driven...