Taking two steps to climb onto the stage: Capital taxes as link between trade and growth

This contribution provides evidence for the hypothesis that trade increases growth through its curbing effect on capital taxes. The analyzed mechanism includes two different steps and considers the critical points of both the theoretical and empirical studies in this field. In particular, the estimation problems of omitted variables and parameter heterogeneity are addressed. Using panel data for a sample of 12 OECD countries in the time period 1967-1996, it is shown that the theoretical predictions can be corroborated by empirical results. --Trade and Growth,Tax Competition,OECD Countries

Growth in a Globalised Economy: The Effects of Capital Taxes and Tax Competition

This contribution provides evidence for the hypothesis that trade increases growth through its curbing effect on capital taxes. The analysed mechanism includes two different steps and considers the critical points of both the theoretical and empirical studies in this field. In particular, the estimation problems of omitted variables and parameter heterogeneity are addressed. Using panel data for a sample of 12 OECD countries in the time period 1967-1996, it is shown that the theoretical predictions can be corroborated by empirical results.Trade and Growth, Tax Competition, OECD Countries

Taxes, Mobile Capital, and Economic Dynamics in a Globalising World

This contribution provides evidence for the hypothesis that trade increases growth through its curbing effect on capital taxes. The analysed trade-growth channel includes a negative impact of open- ness on corporate taxes and a negative effect of taxes on growth. The paper explores the two steps theoretically and empirically, taking into account the critical points of recent studies in this field. Estimations with panel data for a sample of 12 OECD countries in the period 1965-1999 confirm a significant and robust impact of trade on growth through corporate taxes.Trade and Growth, Tax Competition, Capital Taxes and Mobility, OECD Countries

Population growth and natural resource scarcity: long-run development under seemingly unfavourable conditions

The paper develops a model with non-exponential population growth, nonrenewable natural resources, and endogenous knowledge creation to analyse substitution between primary inputs and an essential use of resources in the innovation sectors, which is generally considered as most unfavourable for growth. We show that population growth and poor input substitution are not detrimental but even needed to obtain sustainable consumption. A permanent increase in living standards can be achieved under free market conditions. With a backstop technology, the system converges to a balanced growth path with classical properties.Population growth, non-renewable resources, poor input substitution, technical change, sustainability

Natural resource scarcity and long-run development: central mechanisms when conditions are seemingly unfavourable

Using a dynamic model with non-renewable natural resources and endogenous knowledge creation, the paper analyses economic development under conditions which are generally considered as most unfavourable. We assume poor substitution between primary input factors, positive population growth and a limited supply of materials in the static part of the framework, as well as natural resources being an essential input into R&D, and constant or decreasing returns to innovative activities in the dynamic part. It is shown that there is an inverse relationship between input substitution and growth-enhancing sectoral change and that labour supply supports economic dynamics through the knowledge-creation effect. A permanent increase in living standards is achievable under free market conditions, but adjustment costs and errors in long-term expectations might impede this development.endogenous technological change, environment, natural resources, sustainability

Energy Prices, Growth,and the Channels in Between: Theory and Evidence

The paper first develops a theoretical model with different sectors, each providing a channel for an impact of energy prices on growth. In the short run, growth is hampered by increasing energy prices. In the long run, however, capital accumulation may be crowded out by energy use. This happens in the sectors with poor substitution possibilities between primary inputs where growth increases with rising energy prices. In the empirical part, estimations using di¤erent channels and energy sources with five-year average panel data for a sample of 44 developed countries in the period 1975-1999 are presented. It is shown that, for a large variety of constellations, rising energy prices are not a threat to economic development, they can even be positive for growth.Energy Prices and Growth, Endogenous Capital Accumulation, Structural Change, Panel Data

On the predictability of knowledge formation: The tortuous link between regional specialisation and development

The paper examines the relation between industrial mix and regional productivity growth. For this purpose, a dynamic model of the open economy with differentiated sectoral knowledge formation and incomplete interregional knowledge diffusion is constructed. The theoretical framework is first used to show the consequences of increasing globalisation on regional growth. It is then applied to German regional data in order to investigate whether there is evidence of generally specified patterns of knowledge formation. It emerges that some causal relationships are robust for the case of German regions but cannot be exploited by economic policy in general. --Regional growth,sectoral specialisation,knowledge formation,German regions

Economics of technological change and the natural environment: how effective are innovations as a remedy for resource scarcity?

The paper aims to substantiate the importance of endogenous innovations when evaluating the compatibility of natural resource use and economic development. It explains that technological change has the potential to compensate for natural resource scarcity, diminishing returns to capital, poor input substitution, and material balance restrictions, but is limited by various restrictions like fading returns to innovative investments and rising research costs. It also shows how innovative activities are fostered by accurate price signals and research-favouring sectoral change. The simultaneous effects of increasing technical knowledge, decreasing resource inputs, and increasing world population largely determine the chances of long-run sustainable development. Consequently, future research has to be directed at a more thorough understanding of the mechanisms driving innovations in the presence of natural resource scarcity.endogenous technological change, environment, natural resources, sustainability

Sustainability and substitution of exhaustible natural resources. How resource prices affect long-term R&D-investments

Traditional resource economics has been criticised for assuming too high elasticities of substitution, not observing material balance principles and relying too much on planner solutions to obtain long-term growth. By analysing a multi-sector R&Dbased endogenous growth model with exhaustible natural resources, labour, and knowledge capital as inputs, the present paper addresses this critique. We study transitional dynamics and the long-term growth path and identify conditions under which firms keep spending on research and development so that growth is sustained. We demonstrate that long-run growth can be sustained under free market conditions even when elasticities of substitution between man-made inputs and resources are low.Growth, non-renewable resources, substitution, investment incentives, endogenous technological change, sustainability

Sectoral Heterogeneity, Resource Depletion, and Directed Technical Change: Theory and Policy

We analyze an economy in which sectors are heterogeneous with respect to the intensity of natural resource use. Long-term dynamics are driven by resource prices, sectoral composition, and directed technical change. We study the balanced growth path and determine stability conditions. Technical change is found to be biased towards the resource-intensive sector. Resource taxes have no impact on dynamics except when the tax rate varies over time. Constant research subsidies raise the growth rate while increasing subsidies have the opposite effect. We also find that supporting sectors by providing them with productivity enhancing public goods can raise the growth rate of the economy and additionally provide an effective tool for structural policy.sustainable development, sectoral heterogeneity, directed technical change