Many models of growth and development assume that aggregate output is generated by a Cobb Douglas specification for the aggregate production function with labor, physical capital, and sometimes human capital as inputs. In this paper we question the empirical relevance of the Cobb Douglas specification. We consider new World Bank data on GDP, the labor supply, the stock of physical capital and educational attainment per worker for a panel of 82 countries over a 28 year period fi'om 196(b87. These data are used to estimate a general CES production function specification for which the Cobb Douglas specification is a special case. We find that for the entire 82 country 28 year panel we can reject a Cobb Douglas specification for the aggregate production function. When we divide our sample of 82 countries up into several subsamples based on initial levels of capital per worker, we find that we can continue to reject a Cobb Douglas specification. In particular, we find that physical capital and human capital adjusted labor are more substitutable in the richest group of countries and less substitutable in the poorest group of countries than would be implied by a Cobb Douglas specification. We discuss the implications of our findings for the debate concerning convergence in income levels across countries as well as for the plausibility of long run endogenous growth due to the specification of the production technology.

What determines the relationship between pollution and growth? Are the forces that explain the behavior over time of these quantities potentially useful to understand more generally the relationship between policies and growth? In this paper, we make a first attempt to analyze the equilibrium behavior of two quantities—the level of pollution and the level of income—in a setting in which societies choose, via voting, how much to regulate pollution. Our major finding is that, consistent with the evidence, the relationship between pollution and growth need not be monotone and that the precise equilibrium nature of the relationship between the two variables depends on whether individuals vote over effluent charges or directly restrict the choice of technology. Moreover, our analysis of the pollution problem suggests that, more generally, endogenous policy choices should be taken seriously as potential sources of heterogeneity when studying cross country differences in economic performance.

Without policy reforms, the aging of the U.S. population is likely to increase the burden of the currently unfunded Social Security and Medicare systems. In this paper we build an applied general equilibrium model and incorporate the population projections made by the Social Security Administration (SSA) to evaluate the macroeconomic and welfare implications of alternative fiscal responses to the retirement of the baby-boomers. Our calculations suggest that it will be costly to maintain the benefits at the levels now promised because the increases in distortionary taxes required to finance those benefits will reduce private saving and labor supply. We also find that the “accounting calculations ” made by the SSA underestimate the required fiscal adjustments. Finally, our results confirm that policies with similar long-run characteristics have very different transitional implications for the distribution

In this paper, we develop a general equilibrium model of endogenous growth with heterogeneity in income and tax rates in order to study the e#ect of progressivity on economic growth. We limit heterogeneity to two types skilled and unskilled and posit that the probability of staying or becoming skilled in the subsequent period depends positively on expenses on teacher time. In the production sector, we consider two sources of growth. In the rst, growth arises as a purely external e#ect on account of production activities of skilled workers. In the second, a portion of the skilled workforce is used to work in research and other productivity enhancing activities and is compensated for it. Our analysis shows that changes in the progressivity of tax rates can have positive growth e#ects even in situations where changes in at rate taxes have no e#ect. The assumption made about the engine of growth is important in assessing the e#ect of changes in progressivity; the response is stronger when growth is driven by externality.

In an infinitely-lived framework, taxing capital income may be growth and welfare enhancing when it allows for correcting distorting externalities in the competitive equilibrium allocation. This is the case when public capital is subject to congestion by private capital or total income [Fisher and Turnovsky (1998)] or when government expenditure exerts an external effect on physical capital [Corsetti and Roubini (1996)]. However, none of these features appear in simple one-sector endogenous growth models with public capital. Alternatively, we consider certain realistic fiscal policy constraints in a simple one-sector growth model with productive and unproductive public expenditures, to show that raising revenues through factor income taxes may be preferred to using lump-sum taxes.

We analyze how the dynamic behavior of an endogenous growth model depends on the degree of returns to scale in production. We study a simple model of inventive activity and demonstrate that the case of constant returns to the set of reproducible factors of production (the most commonly studied case in the literature on endogenous growth) is a bifurcation point in parameter space. This bifurcation occurs on the boundary of the state space, making it dicult to analyze formally. For a special case of the model, we provide a transformation that allows us to classify the bifurcation as transcritical using standard methods. We discuss the types of new methods that will be needed to formally classify this bifurcation in a broader class of models. We thank Jess Benhabib, Guido Cozzi, Tapan Mitra, John Nachbar, Kazuo Nishimura, Steve Strogatz, and two anonymous referees for many helpful comments. We are especially indebted to John Guckenheimer and Jan Wenzelburger for useful discus...

In models with a capital spillover, the market outcome is not Pareto e#cient since agents ignore the positive externalities caused by investment. One might conclude that taxes on investment or subsidies to consumption will reduce welfare. However in a model of endogenous growth, either a small tax on capital income, whose proceeds are wasted, increases growth and welfare or a small marginal subsidy to consumption increases growth and welfare. Also if the tax on capital income does not increase growth, a lump sum tax whose proceeds are wasted increases growth and, for a wide range of parameter values, increases welfare. JEL Classi#cation: E62, H31, O41 Keywords: Growth, Taxes, Spillover, Labour Supply,Welfare. # Corresponding author. E-mail address: msrasap@fs1.man.ac.uk. 1 Introduction Recently growth models with an endogenous rate of technical change have provided a new framework for studying the e#ects of taxation. In these models there can be a much larger quantitative...

A trade union whose purpose is to raise wages above the competitive level may foster economic growth if it succeeds in shifting income away from the owners of capital to the workers and if the workers ' marginal propensity to save exceeds the one of capitalists. We make this pointinanoverlapping generations framework with unionized labor. Considering a monopoly union which cares for wages and employment, we determine a range of trade union objectives and characterize the aggregate technology so that the union's policy spurs per capita income growth and increases welfare of all generations that adhere to the union.

this paper. Model simulations using the overlapping-generations model suggest that replacing a pay-as-you-go system with a fully funded system could substantially raise long-term growth rates by eliminating the incentives (under the pay-as-you-go system) to informalize production and employment. A final look at Chile's reform experience suggests that a structural transformation toward forrealization is taking place and that both private savings and growth have been rising substantially since 1980. Econometric evidence suggests that Chile's pension reform, in 1981, could be contributing toward Chile's large increase in private savings

These notes present further discussion and details of several aspects of "Was Malthus Right? Economic Growth and Population Dynamics". They should be readed following each particular section of the main paper.