Competitive Growth Theory

SCHEME: INTER Mobility

CALL: 2017

DOMAIN: LE - Law, Economics, Finance

FIRST NAME: Andreas

LAST NAME: Irmen

INDUSTRY PARTNERSHIP / PPP: No

INDUSTRY / PPP PARTNER:

HOST INSTITUTION: University of Luxembourg

KEYWORDS: Economic growth and demographic change, economic inequality, macro-economic growth, theory of endogenous technical change

START: 2018-03-01

END: 2018-08-30

WEBSITE: https://www.uni.lu

Submitted Abstract

This project concerns research work on macro-economic growth in collaboration with globally leading scholars at their respective host institution. Collaborations are planned with Professor Hippolyte d’Albis at the Paris School of Economics in France and with Professor Oded Galor at Brown University in the US. Besides advancing our understanding of important policy-relevant questions, this project is meant to enhance CREA’s network of international partnerships with top universities in Europe and in the US with the view to establish long-term relationships.The scientific core of this project is the development of an original theory of macro-economic growth. The main engine of economic growth is technical change. The central conceptual novelty is that innovation investments are undertaken by entrepreneurs operating in a perfectly competitive environment. Henceforth, I shall refer to this macro-economic model of endogenous technical change as Competitive Growth Theory (CGT).This research will show that CGT can incorporate striking economic phenomena that the received theory of endogenous technical change neglects. These omissions include important co-called new growth facts such as the exponential decline in the hours worked per worker, the exponential increase in the amount of human capital, and the exponential decline in the relative price of investment goods.The inclusion of these phenomena in CGT allows for a fresh look at key questions of Economics: What policies will increase the standard of living of the world’s poor countries? How should the rich world deal with the challenges of population aging and growing economic inequality? Since CGT emphasizes the role of technical change for the replacemnt of labor by captial, new insights are to be expected about the effect of modern technologies (“The Third Industrial Revolution”) for economic growth, unemployment, and the distribution of factor incomes. Hence, this research will also contribute to the current “sustainable growth debate” in Luxembourg.The ultimate purpose of this project is to establish CGT as a comprehensive alternative to existing macro-economic theories of endogenous technical change. An appropriate means to accomplish this is to build this theory from scratch and to present its unfolding in book format.

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