Weak Scale Effects in Overlapping Generations Economy

Bharat Diwakar and Gilad Sorek

No auwp2016-12, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: We show how the two alternative saving motives, life-cycle consumption smoothing and parental bequests, determine the relation between population growth and R&D-based economic growth, i.e. the sign of the weak scale effect. We take a textbook R&D-based growth model of infinitely living agents with no life-cycle saving motive and re-analyze it in the Overlapping Generations (OLG) framework, which incorporates both life-cycle and bequest saving motives. We decompose the effect of each saving motive on the sign of the weak scale effect, and show that in the presence of both saving motives it is ambiguous in general, and may also be non-monotonic. Hence, this study contributes to the recent line of research aimed to align modern growth theory with the empirical evidence on the relation between population growth and economic prosperity.

Keywords: R&D-based Growth; Weak Scale-Effect; Bequests; OLG (search for similar items in EconPapers)
JEL-codes: O31 O40 (search for similar items in EconPapers)
Date: 2016-10
New Economics Papers: this item is included in nep-age, nep-dge and nep-gro
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Journal Article: Weak Scale Effects in Overlapping Generations Economy (2017)
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