publication . Article . 2012

An Accounting Method for Economic Growth

Hongchun Zhao;
Open Access
  • Published: 01 Jan 2012 Journal: Frontiers of Economics in China, volume 7, issue 1 March, pages 44-69
As Chari et al. (2007) indicate, many growth theories explaining frictions in real economies are equivalent to a competitive economy, with some exogenous taxes. Using this idea, I developed an accounting method for identifying fundamental causes of economic growth. A two-sector neoclassical growth model with taxes is used as a prototype economy, and its equilibrium conditions define wedges. These wedges endogenously determine the long run growth rate, which is exogenous and not correlated with any other variables in a one-sector growth model. Furthermore, the importance of wedges in explaining the long-run growth rate can be evaluated through the use of a protot...
free text keywords: accounting method, economic growth, equivalence results, potential growth rate, jel:E13, jel:O11, jel:O41, jel:O47
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