EconPapers: When is the Spirit of Capitalism Effective for Economic Development?
When is the Spirit of Capitalism Effective for Economic Development?
Abstract: By incorporating endogenous innovation and wealth preference into the growth model, this paper aims to combine two important factors of economic development ¡ª ¡°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.