The spirit of capitalism, innovation and long-run growth

Bowen Shi, Gaowang Wang and Heng-Fu Zou (hzoucema@gmail.com)

MPRA Paper from University Library of Munich, Germany

Abstract: We develop an endogenous growth model incorporating the spirit of capitalism and examine how it influences innovation and economic growth. In the benchmark homogeneous-ability model, we find that the spirit of capitalism increases both the capital accumulation rate by enhancing consumer patience and the knowledge accumulation rate by reallocating human capital from the final goods sector to the R&D sector, both of which drive the endogenous growth of the macroeconomy. In the extended heterogeneous-ability model, we identify an additional channel through which the spirit of capitalism boosts innovation and economic growth: by lowering the shreshold ability required to become an entrepreneur and increasing the amount of human capital working in the R&D sector.

Keywords: The spirit of capitalism; innovations; endogenous growth; heterogeneous ability (search for similar items in EconPapers)
JEL-codes: E1 O3 O4 (search for similar items in EconPapers)
Date: 2019, Revised 2024-10-17
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:122417

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