When is the Spirit of Capitalism Effective for Economic Development?
- Shiro Kuwahara
AbstractBy incorporating endogenous innovation and wealth preference into the growth model, this paper aims to combine two important factors of economic development — “creative destruction,” as emphasized by Schumpeter (1912) and modelized by Aghion and Howitt (1992), and the “spirit of capitalism,” proposed by Weber (1905). Zou (1994) introduced this “spirit of capitalism” into the modern growth analysis by reinterpreting the Kurz (1968) model, wherein a preference on asset accumulation is introduced into the Ramsey model. By uniting these two factors, we obtain the result that this preference basically stimulates the long-term growth rate, and that it is eﬀective when the economy has a too low innovation eﬃciency. However, the eﬀect is small for an economy with a suﬃciently high innovation eﬃciency.
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