A New Theory of Demand-Restricted Growth: The Basic Idea

2019 ◽  
Vol 65 (1) ◽  
pp. 11-27
Author(s):  
Thomas Gries
Keyword(s):  
Capital Accumulation ◽  
Growth Process ◽  
Hybrid Approach ◽  
Supply Side ◽  
Growth Path ◽  
Equilibrium Concept ◽  
Potential Growth ◽  
Growth Restrictions ◽  
Jel Classifications ◽  
Stationary Behavior

In mainstream theory, growth is explained fully by elements of the supply side. In this article, we depart from neoclassical mechanisms and suggest a hybrid approach that allows for growth restrictions induced by demand-side elements. We obtain such demand-restricted growth by suggesting an unconventional equilibrium concept in a stochastic environment. We define macroeconomic equilibrium as stationary no-expectation-error equilibrium. This equilibrium concept relates to the Nash idea of individual stationary behavior as long as expectations prove to be realized. No rigidities are introduced. Even if potential growth is generated by technical change and capital accumulation, the growth path is restricted by effective earnings and can be stable below the neoclassical path of potential growth. However, the growth process mutates to the neoclassical process if effective earnings and potential earnings equalize. Therefore, our hybrid model could help to bridge a gap between Keynesian and neoclassical ideas of economic growth. JEL Classifications: E12, E13, O40, E60

Hungarian small business tax and possibilities to minimize distortions from capital income taxation

2015 ◽  
Vol 37 (s1) ◽  
pp. 87-105
Author(s):  
Benedek Nobilis ◽  
András Svraka
Keyword(s):  
Small Business ◽  
Cash Flow ◽  
Capital Accumulation ◽  
Value Added ◽  
Regulatory Elements ◽  
Capital Income ◽  
Potential Growth ◽  
Elegant Method ◽  
Business Tax ◽  
Working Out

Governments throughout the EU and OECD countries rely on revenues raised on capital income. Albeit several arguments can be made for keeping these taxes, in their widespread form they hinder capital accumulation and significantly lower potential growth due to their savings and investment distorting nature. At the same time, the actual economic impact of tax types is largely influenced by their structure. An elegant method, which is also simple in its concept, for eliminating the economic distortions of profit taxes is cash-flow taxation which moves income taxes closer to the more growth-friendly value-added taxes. The small business tax, which was introduced in Hungary in 2013, was designed along these principles. In this paper we review the theoretical literature on cash-flow taxation and discuss the main regulatory elements of the small business tax, as well as the solutions elaborated for working out the challenges related to its implementation.

Impact of a poignant pandemic COVID-19 on Indian Economy

2020 ◽  
Vol 11 (SPL1) ◽  
Author(s):  
Krati Sethi ◽  
Manas Roy
Keyword(s):  
Public Health Emergency ◽  
World Health ◽  
Special Treatment ◽  
Supply Side ◽  
Growth Path ◽  
Indian Economy ◽  
The Past ◽  
Policy Measures ◽  
Health Organization ◽  
Consumption Demand

Coronavirus disease (COVID-19) is a contagious disease caused due to a “Severe Acute Respiratory Syndrome Coronavirus -2 virus” (SARS-COV-2). People who fall ill will experience mild to moderate fever and will retrieve without any special treatment. This pandemic was first seen at Wuhan, China in December 2019. After seen it’s dreadfulness it was declared as a “public health emergency of international concern” (World Health Organization, WHO). As on 1 May 2020 more than 35000 cases have been reported in India resulting in more than 1147 deaths in India till date. It has also led severe socio-economic global disruption. Presently significant slowdown is experienced by Indian economy over the past few quarters.To rectify sluggish consumption demand and investment a numeral of incentive measures has been taken to retrieve the economy towards prosperity. The last quarter of the current fiscal exhibits robust prospect of improvement. However, the new COVID-19 epidemic has contrived the recovery exceptionally arduous in the near to middle terms. The pandemic has thrown new threats for the Indian economy from demand as well as from the supply side. This study is descriptive. The objective of the current study is to find out the impacts of the outbreak of COVID-19 on different sectors of our country. In conclusion, this study suggests policy measures to safeguard the Indian economy from the outbreak of it and bring it back on the growth path.

scholarly journals DAMPAK AKUMULASI MODAL, EKSPOR, MARGINAL EFFICIENCY OF CAPITAL (MEC), INFLASI DAN SISTEM PEMERINTAHAN TERHADAP PERTUMBUHAN EKONOMI

Media Ekonomi ◽  
2019 ◽  
Vol 25 (2) ◽  
pp. 107
Author(s):  
Asti Karlina Dewi
Keyword(s):  
Economic Growth ◽  
Capital Accumulation ◽  
Positive Impact ◽  
Secondary Data ◽  
Supply Side ◽  
Decentralized System ◽  
Factors Affecting ◽  
Dummy Variables ◽  
The Impact ◽  
Better Than

<em>The research is analyzing the Impact of Capital Acumulation, Export, MEC, Inflation and Governace System on Indonesian Economic Growth. </em><em>The model tries to combine the supply side (capital accumulation and MEC) and the demand side (export and inflation), also by including government systems for predicting the factors affecting economic growth. The data used are secondary data obtained from BPS, BI and other data sources from 1987 to 2016 (except data from 1998, 1999, and 2000 due to data in that year's is extreme). To find out whether there is a difference in the phenomenon of economic growth in centralized systems with decentralize system used dummy variables.</em> <em>The results of the study showed that the model is significant in explaining changes in economic growth. The impact of capital accumulation on economic growth is positive significant, as well as the impact of exports. But the impact of MEC as well as of inflation on economic growth is not significant.  By seeing that the variable dummy has a significant positive impact on economic growth, it can be argued that economic growth in the decentralized system is better than the centralized.</em>

Effectiveness versus Efficiency: Growth-Accelerating Policies in a Model of Growth without Scale Effects

2006 ◽  
Vol 7 (3) ◽  
pp. 297-316 ◽  
Author(s):  
Bettina Büttner
Keyword(s):  
Human Capital ◽  
Capital Accumulation ◽  
Scale Effects ◽  
Growth Models ◽  
Human Capital Accumulation ◽  
Growth Path ◽  
Balanced Growth ◽  
Long Run ◽  
Theoretical Finding ◽  
Balanced Growth Path

Abstract Recent R&D growth models without strong scale effects imply that long-run growth rates depend only on parameters that are usually taken to be exogenous. However, integrating human capital accumulation into models of this type, Arnold (2002) demonstrates that subsidizing education accelerates growth. The present paper addresses welfare issues in Arnold’s model. The main theoretical finding of the paper is that a system of subsidies that implements the optimal balanced growth path as a decentralized equilibrium includes zero subsidies to education, while R&D activity should be either subsidized or taxed. To shed further light on the latter result, the model is calibrated and it turns out that along the balanced growth path, the decentralized economy underinvests in R&D, i.e. R&D activities should be subsidized.

Rethinking the Asian Financial Crisis Through the Capital Account Crisis Paradigm

2001 ◽  
Vol 2 (1) ◽  
pp. 111-122
Author(s):  
Yeomin Yoon ◽  
Robert McGee
Keyword(s):  
Financial Crisis ◽  
Preventive Measures ◽  
Political Process ◽  
Asian Financial Crisis ◽  
The Political ◽  
Capital Account ◽  
Economic Policies ◽  
Growth Path ◽  
Potential Growth ◽  
The Great Depression

In this paper the authors rethink the Asian financial crisis that occurred in 1997-1998 through the relatively new capital account crisis paradigm. They argue that this paradigm provides a much more appropriate perspective to frame the questions regarding causes, cures, and preventive measures raised by the Asian crisis, and that it provides a more persuasive explanation for the greater-than-expected severity of the crisis than that which would have been expected from an analysis based on the traditional current-account mode of thinking. he authors conclude that, just as the Great Depression was a tragic testament to the failure of the political process to yield economic policies appropriate for sustaining the economy on a potential growth path, the Asian financial crisis may also be so construed.

A Reconsideration of the Role of Demand in Malthus’s Theory of Accumulation*

2020 ◽  
Vol 39 (1) ◽  
pp. 57-76
Author(s):  
Matthew Smith
Keyword(s):  
Political Economy ◽  
Economic Activity ◽  
Capital Accumulation ◽  
Investment Analysis ◽  
Supply Side ◽  
Effective Demand ◽  
Supply Side Factors

Abstract This paper is concerned with the role of effective demand in Malthus’s theory of accumulation expounded in his Principles of Political Economy. As is well known, Keynes praised Malthus for being a forerunner in identifying a lack of effective demand as a cause of depression in economic activity and a constraint on growth. There have since been many interpretations in the literature of Malthus’s position by reference to his arguments against Say’s Law in contending the possibility of “general gluts” and to his theory of capital accumulation. We begin by examining Malthus’s conception of the supply-side factors that determine what we call, “potential accumulation”, being accumulation that is not constrained by demand. The paper then considers the role of effective demand in Malthus’s well known contention of the possibility of “general gluts” and, connectedly, in his theory of demand-constrained capital accumulation. On this basis, we then appraise whether Malthus’s theory anticipates Keynes’s principle of effective demand by reference to the debate on this question in the literature, showing that while Malthus lacked a meaningful saving-investment analysis, he does provide insights important to the modern demand-led approach to growth.

scholarly journals The Supply-side Analysis and Countermeasures of Exuberant Phenomenon of Outbound Consumption at Present

2018 ◽  
Vol 1 (1) ◽  
Author(s):  
Guojun Chai ◽  
Jianping Li
Keyword(s):  
Capital Accumulation ◽  
Brand Value ◽  
Supply Side ◽  
Human Capital Accumulation ◽  
Demand Side ◽  
Foreign Brand ◽  
Brand Construction ◽  
Domestic Prices ◽  
Foreign Brands ◽  
Domestic Products

In recent years, the exuberant phenomenon of Chinese residents leaving the country shopping has caused much attention in academic circles. Applying game theory, from the supply-side not the demand-side interpreting outbound consumption boom, it is the addition of brand value and reputation guarantee, as a result, the middle- and high-end consumers in our country are more willing to go abroad to purchase well-known foreign brand products, not to purchase domestic products with low prices, and not to favor the high domestic prices of foreign brands. Therefore, to guide the overseas consumption backflow of middle-and high-income families, we need to implement supply-side structural reform such as strengthening the brand construction of national enterprises, attaching importance to scientific research input and human capital accumulation.

scholarly journals Causes and implications of the current mass emigration process in Latin America

2005 ◽  
pp. 113 ◽  
Author(s):  
David Khoudour-Castéras
Keyword(s):  
Latin America ◽  
Latin American ◽  
Migrant Workers ◽  
Capital Accumulation ◽  
Labour Force ◽  
Dutch Disease ◽  
Current Account Balance ◽  
Short Term ◽  
Structural Determinants ◽  
Potential Growth

Since the mid-1970s, most Latin American countries have become net exporters of labour and this trend has accelerated over the past decade. Wide differences in income with industrialised countries, a low level of social investment and the existence of a large national community already established abroad are all factors that are conducive to the emigration of workers. Both geographic and linguistic proximity also play a significant role in this process. However, beyond the structural determinants, emigration also responds to short-term variations in economic activity, increasing when growth lags and unemployment rises, especially if economic conditions are strong in host countries. The linkage between migration flows and economic cycles is also reinforced by fixed exchange rates in the sending country, as labour mobility then acts as an adjustment mechanism. Although the emigration of a portion of the labour force helps the short-term adjustment of Latin American economies by reducing labour market tensions and improving the current account balance, the longterm implications give great cause for concern. In particular, the massive influx of capital through remittances sent by migrant workers to their families might generate a "Dutch disease" situation detrimental to the development of the export sector, while the brain drain might curtail human capital accumulation in Latin America, thereby reducing the region's potential growth. Consequently, Latin American governments must take action in order to try to control a process that could compromise the region's economic and social future.

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