Life Cycle Savings, Bequest and the Diminishing Impact of Scale on Growth
With Martin Kaae Jensen
Abstract:
There appears to be ample evidence that the size of population acted as a stimulus to growth in historical times; scale mattered. In the post World War II era, however, there is little evidence of such scale effects on growth. Where did the scale effect go? The present paper shows that the savings motive critically affects the size and sign of scale effects in standard endogenous growth models. If the bequest motive dominates, the scale effect is positive. If the life cycle motive dominates, the scale effect is ambiguous and may be negative. A declining importance of bequest in capital accumulation could therefore be one reason why scale seems to matter less today than in historical times.Download pdf. file (Discussion paper No 07-17, Department of Economics, University of Copenhagen)
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Updated August 200
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