Christian GrothAssociate Professor, Ph.D., Department of Economics,

University of Copenhagen,

Øster Farimagsgade 5, Building 26, Office 26.0.40

chr.groth@econ.ku.dk

Ph: (+45) 35 32 30 28, Fax: (+45) 35 32 30 00Selected research publications

Publications and working papers classified by themes and with summaries

Miscellaneous writings and debate (in Danish)

CV

Selected research publicationsAcrobat Reader 5 DownloadDo Mincerian Wage Equations Inform How Schooling Influences Productivity? (with Jakub Growiec). WP, June 2017.

Growth or stagnation in pre-industrial Britain? A revealed income growth approach, University of Warwick WP Series 264-2016; with Karl Gunnar Persson.

Medium-term Fluctuations and the "Great Ratios" of Economic Growth (with Jakob B. Madsen),

Journal of Macroeconomics,vol. 49, 2016, 149-176. Supplementary Material.On aggregating human capital across heterogeneous cohorts (with Jakub Growiec),

Mathematical Social Sciences,vol. 78, 21-38, 2015.Embodied learning by investing and speed of convergence,

Journal of Macroeconomics,vol. 40, 245-269, 2014, http://dx.doi.org/10.1016/j.jmacro.2014.01.009 (with Roland Wendner). PDF: Sept. 2013. Supplementary data online.

Optimal growth when environmental quality is a research asset,Research in Economics(formerlyRicerche Economiche), vol. 65, 2011, 340-352 (with Francesco Ricci).When economic growth is less than exponential,

Economic Theory,vol. 44, no. 2, 2010, 213-242 (with K.-J. Koch and T. M. Steger). Errata.A New-Growth Perspective on Non-renewable Resources. In:

Sustainable Resource Use and Economic Dynamics, ed. by L. Bretschger and S. Smulders, Springer (the seriesThe Economics of Non-Market Goods and Resources), Dordrecht, 2007, pp. 127-163.Growth and Non-renewable Resources: The Different Roles of Capital and Resource Taxes,

Journal of Environmental Economics and Management,vol. 53, no. 1, 80-98, 2007 (with P. Schou).Too Little or Too Much R&D?,

European Economic Review, vol. 49, no. 2, 2005, 437-456 (with Maria Alvarez-Pelaez). Errata. With Mathematical Supplement, PDF.Strictly Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate,

The B.E. Journal of Macroeconomics. Topics. Vol. 4, no. 1, 2004, 1-13. Errata.Profitable Unproductive Innovations, CentrA Working Paper Series E 2003/42, April 2003 (with Maria Pelaez-Alvarez).

Can Non-Renewable Resources Alleviate the Knife-edge Character of Endogenous Growth?

Oxford Economic Papers, vol. 54, no. 3, July 2002, 386-411 (with Poul Schou). With separate mathematical Supplement available at: http://oep.oxfordjournals.org/content/vol54/issue3/index.dtlSome Unfamiliar Dynamics of a Familiar Macro Model: A Note,

Journal of Economics, vol. 58, 1993, 293-305.

Research publications and workingpapers classified by themes and with summariesMy research can be divided into four categories:

A. Economic growth and technological change

B. Natural resources and economic growth

C. Business cycle theory

D. Fiscal policy

A.Economic growth and technological changeDo Mincerian Wage Equations Inform How Schooling Influences Productivity? (with Jakub Growiec). WP, June 2017.

Summary:Based on a stylized Mincerian general equilibrium model with imperfect substitutability across skill types andex anteidentical workers, we provide a theoretical argument why the cross-sectional relationship between wages and years of schooling may not convey any information on the underlying human capital production function. We show that identification of the human capital production function, measuring how schooling influences productivity, should take into account the equilibrium allocation of individuals across skill types.Growth or stagnation in pre-industrial Britain? A revealed income growth approach, University of Warwick WP Series 264-2016; with Karl Gunnar Persson.

Summary:The extent of growth in pre-industrial Europe in general and in Britain in particular has attracted intense scholarly focus. Growth or Malthusian stagnation? No consensus has evolved. Reconstructions of national income from 1300 and up to the Industrial Revolution come to opposing conclusions and so do econometric studies. Applying Engels’ law, we suggest a new approach in which income growth is revealed by changes in occupational structure. Data needed for this approach are less contested than the wage and output series used in the existing literature. We find that pre-industrial Britain exhibited secular rise in the standard of living.On aggregating human capital across heterogeneous cohorts (with Jakub Growiec),

Mathematical Social Sciences,vol. 78, 21-38, 2015.

Summary:This paper studies the question: Can the microeconomic Mincerian (log-linear) functional relationship between human capital, years of schooling and work experience be recovered in some similar form at the macroeconomic level? A large macroeconomic literature assumes so, warranting that the question is of interest. We first examine the question at a theoretical level and find that except under very special assumptions, the answer is in the negative. On the other hand, we also show numerically that a macro-Mincer relationship can nevertheless be perceived as a quantitatively reasonable approximation of the theoretically derived ‘‘true’’ relationship, at least if the observed heterogeneity comes only from differences in the number of years of schooling, retirement age, or demographic survival laws.Embodied learning by investing and speed of convergence,

Journal of Macroeconomics,vol. 40, 245-269, 2014, http://dx.doi.org/10.1016/j.jmacro.2014.01.009 (with Roland Wendner). PDF: Sept. 2013. Supplementary data online.

Summary:We study transitional dynamics and speed of convergence in economic growth. Based on a canonical framework the analysis revisits both "old" and "new" growth literature along three dimensions: (i) What if growth is not exogenous but endogenous and driven by learning by doing? (ii) What if technical progress is embodied rather than disembodied? And (iii) what if the vehicle of learning is gross investment as in the Arrowian tradition rather than net investment as in most recent contributions? From both a theoretical and a quantitative point of view we show that the speed of convergence (both asymptotically and in a finite distance from the steady state) depends

strongly and negatively on the importance of learning in the growth engine and on gross investment being the vehicle of learning rather than net investment. And contrary to a presumption from "old growth theory", a rising degree of embodiment in the wake of the computer revolution isnotlikely to raise the speed of convergence when learning by investing is the driving force of productivity increases.

Keywords:Transitional dynamics; speed of convergence; learning by investing; embodied technological progress; decomposable dynamics.When economic growth is less than exponential,

Economic Theoryvol. 44, 2010, 213-242 (with K.-J. Koch and T. M. Steger). Errata.

Summary:This paper argues that growth theory needs a more general notion of "regularity" than that of exponential growth. We suggest that paths along which the rate of decline of the growth rate is proportional to the growth rate itself deserve attention. This opens up for considering a richer set of parameter combinations than in standard growth models. And it avoids the usual oversimplistic dichotomy of either exponential growth or stagnation. By allowing zero population growth in three different growth models (the Jones R&D-based model, a learning-by-doing model, and an embodied technical change model), we are able to show how a continuum of "regular" or "quasi-arithmetic" growth processes fill the whole range between exponential growth and complete stagnation. The previous literature did not lead to any clearcut conclusions for the case of zero population growth.Keywords:Quasi-arithmetic growth; Regular growth; Semi-endogenous growth; Knife-edge restrictions; Learning by doing; Embodied technical change.Too Little or Too Much R&D?,

European Economic Review, vol. 49, no. 2, 2005, 437-456 (with Maria Alvarez-Pelaez). Errata. With Mathematical Supplement, PDF.

Summary:According to first-generation models of endogenous growth based on expanding product variety, the market economy unambiguously generates too little R&D. Later, by disentangling returns to specialization from the market power parameter, it was shown that with sufficiently low returns to specialization too much R&D can occur. The present paper takes a step further, disentangling the market power parameter from the capital share in final output. This disentangling of arbitrarily identified parameters turns out to help finding too much R&D as well.

The paper further shows that absence of this disentangling blurs the positive effect on the incentive to innovate of an increase in the monopolist markup. Moreover, by differentiating between net and gross returns to specialization it is demonstrated what drives the differing inefficiency results in the literature. The decisive factor behind excessive R&D is the implicit presence of negative externalities of increased specialization. Empirically, an advantage of the more general framework is better agreement with the observed level of markups and the observed falling tendency of the patent/R&D ratio.Keywords:Endogenous growth; R&D; Expanding product variety; Creative destruction; Optimal growth.Innovation and Growth: What Have We Learnt From the Robustness Debate? Discussion Papers no. 04-29, Dept. of Econ., University of Copenhagen, November 2004.

Profitable Unproductive Innovations, CentrA Working Paper Series E 2003/42, April 2003 (with Maria Pelaez-Alvarez).

Growth with Public Research and Private Education, Institute of Economics, University of Copenhagen Discussion Papers No. 95-20, 1995.

Endogen teknologisk udvikling,

Nationaløkonomisk Tidsskrift (Danish Journal of Economics), årg. 130, nr. 2, 1992, 350-359.

In Danish with an English summary. The paper discusses basic ideas in Paul Romer's R&D model of endogenous exponential growth (JPE, 1990). Notable implications of extending the model by allowing for population growth and decreasing marginal productivity of knowledge in the creation of new knowledge are considered. This leads to the distinction between "strictly endogenous growth" and "weakly endogenous growth", corresponding to what later became known as "fully-endogenous growth" and "semi-endogenous growth", respectively.

Different Indecomposability Concepts for a von Neumann Technology: A Note,Metroeconomica, vol. 37, no. 2, 1986, 157-166.

Natural resources and economic growth

B.Optimal growth when environmental quality is a research asset,

Research in Economics(formerlyRicerche Economiche), vol. 65, 2011, 340-352 (with Francesco Ricci).

Summary:We advance the hypothesis that a good state of the environment positively affects labor productivity in R&D such that deteriorating environmental quality impacts R&D negatively. We study the implications of this assumption for the optimal solution in an R&D-based model of growth, where the use of a non-renewable resource generates pollution. In such a case, it is socially optimal to postpone extraction, as opposed to the situation in which the environment has no effect on productivity in R&D. Furthermore, insofar as environmental quality declines and subsequently recovers, it is optimal to re-allocate employment to R&D in line with productivity changes. If environmental quality recovers only partially from pollution, R&D effort optimally begins above its long-run level, then progressively declines to a minimum and eventually increases to its steady-state level.

Keywords: Endogenous growth; non-renewable resources; environmental quality; environmental hysteresis.Growth and Non-renewable Resources: The Different Roles of Capital and Resource Taxes,

Journal of Environmental Economics and Management,vol. 53, no. 1, 80-98, 2007 (with P. Schou).

Summary:We contrast effects of taxing non-renewable resources with the effects of traditional capital taxes and investment subsidies in an endogenous growth model. In a simple framework we demonstrate that when non-renewable resources are a necessary input in the sector where growth is ultimately generated, interest income taxes and investment subsidies can no longer affect the long-run growth rate, whereas resource tax instruments are decisive for growth.

The results stand out both against observations in the literature from the 1970's on non-renewable resources and taxation - observations which were not based on general equilibrium considerations - and against the general view in the newer literature on taxes and endogenous growth which ignores the role of non-renewable resources in the "growth engine".

Keywords: Non-renewable resources; endogenous growth; capital taxation; resource taxation; carbon taxes; climate change; optimal taxation.A New-Growth Perspective on Non-renewable Resources. In:

Sustainable Resource Use and Economic Dynamics, ed. by L. Bretschger and S. Smulders, Springer (the seriesThe Economics of Non-Market Goods and Resources), Dordrecht, 2007, pp. 127-163.

Summary:Within a unified framework this survey reviews issues related to the incorporation of scarce natural resources in the theory of economic growth and development. The focus is on the role of non-renewable resources and the theme of limits to growth. The first sections portray the waves of natural resource economics of the 1970s and so-called New Growth Theory from the 1990s. In the next sections formal one- and two-sector growth models with non-renewable resources and endogenous technological change are set up and discussed. The analysis lays bare the key role of the distinction between resources that are growth-essential and resources that are not. The former case arises when for instance not only labor but also capital is an input in R&D. Then a non-renewable resource which is a necessary input in the capital-producing sector, is indirectly a necessary input also for the R&D sector. This affects the conclusions in important ways: more narrow limits to growth arise; the scope for various policy tools changes; no knife-edge condition is any longer needed for fully endogenous growth; there is no scale effect on growth; and population growth can easily be integrated.

Keywords: Endogenous growth; innovation; non-renewable resources; knife-edge conditions; robustness; limits to growth.Growth-essential non-renewable resources and limits to growth, paper presented at the "Environment, Innovation and Performance Conference", Grenoble, June 04-06, 2007.

Summary:The standard approach to modelling endogenous technical change in an economy with an essential non-renewable resource ignores that also R&D may need the resource (directly or indirectly). This biases the limits-to-growth discussion in an optimistic direction. Indeed, sustained per capita growth requires stronger parameter restrictions when the resource is directly or indirectly an input in R&D and thus "growth essential" than when it is not. When the resource is “growth essential”, a policy aiming at stimulating long-run growth generally has to reduce the long-run depletion rate. In this sense promoting long-run growth and "supporting the environment" go hand in hand.: Endogenous growth; innovation; non-renewable resources; knife-edge conditions; robustness; limits to growth.

KeywordsStrictly Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate,

The B.E. Journal of Macroeconomics. Topics. Vol. 4, no. 1, 2004, 1-13. Errata.

Summary:Conventional endogenous growth theory relies on the assumption of constant returns to "broad capital". As Solow pointed out, the strength of this assumption is revealed by recognizing that even the slightest touch of increasing returns creates explosive growth: infinite output in finite time! But Solow's observation ignored natural resources. What happens if non-renewable resources enter the "growth engine"? In this case (strictly) endogenous growth requires the technology to be such that there is no upper bound on the sustainable per capita growth rate. This corroborates Solow's scepticism.

Keywords: Endogenous growth; semi-endogenous growth, non-renewable resources, knife-edge.Can Non-Renewable Resources Alleviate the Knife-edge Character of Endogenous Growth?

Oxford Economic Papers, vol. 54, no. 3, July 2002, 386-411 (with Poul Schou). With separate mathematical Supplement available at: http://oep.oxfordjournals.org/content/vol54/issue3/index.dtl

Summary:Standard endogenous growth models rely on the arbitrary assumption that the technology has exactly constant returns with respect to producible inputs. Can this knife-edge restriction be relaxed by including non-renewable resources as necessary inputs in production? In a one-sector optimal growth model, we find that the strain on the economy imposed by the need to extract successively smaller amounts of the non-renewable resource can offset the potentially explosive effects of allowing for increasing returns to producible inputs. However, growth in per capita consumption will be unstable unless there is population growth. Thus, the knife-edge problem of (strictly) endogenous growth reappears as an instability problem. But a "semi-endogenous" growth framework turns out to be an attractive alternative, relying on less restrictive parameter values, maintaining stability, and allowing a rich set of determinants of long-run growth.

Keywords: Endogenous growth; semi-endogenous growth; knife-edge problem; non-renewable resources; robustness.

C. Business cycle theoryMedium-term Fluctuations and the "Great Ratios" of Economic Growth (with Jakob B. Madsen),

Journal of Macroeconomics,vol. 49, 2016, 149-176. Supplementary Material.

Summary:Evidence for the OECD countries show that the “great ratios”, such as the unemployment rate, factor shares, Tobin’sqand the investment-capital ratio, fluctuate significantly on medium-term frequencies of 10-40 years duration. To explain these medium-term fluctuations, we establish a macro-dynamic model where theq-theory of investment is combined with sluggish real-wage adjustment in the labour market. For plausible values of the elasticity of factor substitution real wage sluggishness creates dampedinternaloscillations in the endogenous variables. Thereby hump-shaped responses to a variety of shocks arise.

Key words:Medium-term cycles; Tobin's q: real-wage Phillips curve; elasticity of factor substitution; endogenous oscillations.

Highlights:

· We extend the Tobin’s q model of Abel and Blanchard (1983) by allowing unemployment due to sluggish real-wage adjustment in the labour market.

· Thereby the fluctuations in aggregate activity reflect fluctuations in the unemployment rate rather than in labour supply as in standard RBC theory,

· For plausible values of the elasticity of factor substitution, real wage sluggishness creates dampedinternaloscillations in the endogenous variables. Thereby hump-shaped responses to a variety of shocks arise.

· This possibility of internal oscillations challenges the claim by Kydland and Prescott (1990) that “cyclical laws of motion do not arise … for economies with reasonable statements of people’s ability and willingness to substitute”.

· A higher degree of convexity in capital adjustment costs increases the period length while increased sluggishness in real-wage adjustment amplifies employment fluctuations.

· In response to productivity shocks Tobin’sqand investment lead fluctuations in employment and output, while real wages are lagging.Some Unfamiliar Dynamics of a Familiar Macro Model: A Note,

Journal of Economics, vol. 58, 1993, 293-305.In the 1970s, the Keynesian-Monetarist dynamic IS-LM model with expectations-augmented Phillips curve, adaptive inflation expectations, and passive ("monetarist") monetary policy was studied intensively. It was shown that the model features a

Summary:locallyasymptotically stable full-employment steady state if and only if the so-called Cagan condition is satisfied. This stability result became conventional wisdom of mainstream macroeconomics as presented in many intermediate textbooks in the 1980s and 1990s (sometimes even without mentioning its dependence on the Cagan condition).

There is, however, a serious hole in the theory. This derives from the lack of attention to the zero lower bound on the nominal interest rate which implies an inherent non-linearity in the economy. Therefore, local asymptotic stability does not imply global asymptotic stability. This paper shows that even under the Cagan condition, if the full-employment steady state is disturbed by a large adverse demand shock, a self-reinforcing deflationary spiral arises bringing the economy further and further below full employment. This result about a "dynamic liquidity trap" underpins, at the theoretical level, Leijonhufvud's "corridor" hypothesis (Leijonhufvud, 1973).IS-LM dynamics; Global dynamics; Corridor; Deflationary spiral; Liquidity trap.

Keywords:Strange Attractors and Endogenous Business Cycle Theory: Comment. In:

Business Cycles: Theories, Evidence and Analysis. Proceedings of a Conference held by the International Economic Association, ed. by N. Thygesen, K. Velupillai and S. Zambelli, London 1991, pp. 200-204.

IS-LM Dynamics and the Hypothesis of Combined Adaptive-forwardlooking Expectations. In: P. Flaschel and M. Krüger, eds.,Recent Approaches to Economic Dynamics. Verlag Peter Lang, Frankfurt a/M 1988, pp. 251-66.Lecture note on Long-run aspects of fiscal policy and public debt (chapter draft for a macroeconomics text in the pipeline, Sept. 2016).

Short- and long-run aspects of fiscal policy in a deep recession. A note, February 2011, revised May 2012.

Growth and Non-renewable Resources: The Different Roles of Capital and Resource Taxes,

Journal of Environmental Economics and Management,vol. 53, no. 1, 80-98, 2007 (with P. Schou).

Summary:We contrast effects of taxing non-renewable resources with the effects of traditional capital taxes and investment subsidies in an endogenous growth model. In a simple framework we demonstrate that when non-renewable resources are a necessary input in the growth-generating sector, interest income taxes and investment subsidies can no longer affect the long-run growth rate, whereas resource tax instruments are decisive for growth.

The results stand out both against observations in the literature from the 1970's on non-renewable resources and taxation - observations which were not based on general equilibrium considerations - and against the general view in the newer literature on taxes and endogenous growth which ignores the role of non-renewable resources in the "growth engine".

Keywords: Non-renewable resources; endogenous growth; capital taxation; resource taxation; carbon taxes; climate change; optimal taxation.Growth with Public Research and Private Education, Institute of Economics, University of Copenhagen Discussion Papers No. 95-20, 1995.

IN DANISH:

Debatten om stabilitets- og vækstpagten,

Samfundsøkonomen, 2008, nr.1, 42-48. Erratum-----

Lecture notes and class exercises:Recent courses and Archive.

Chronological complete lists of research publications, working papers and other writings(as of May 2012)

CV(as of Sept. 2012)