When is the Spirit of Capitalism Effective for Economic Development?

Shiro Kuwahara

Abstract


By 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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DOI: https://doi.org/10.5539/ijef.v10n3p70

Copyright (c) 2018 Shiro Kuwahara

License URL: http://creativecommons.org/licenses/by/4.0

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)  Email: ijef@ccsenet.org

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