Indeterminacy in a Matching Model of Money with Productive Government Expenditure
with Angus C. Chu, Chih-Hsing Liao and Xiangbo Liu
Forthcoming, International Review of Economics and Finance. paper
Abstract: This study explores the effects of inflation on economic growth in a two-sector monetary search-and-matching model with productive government expenditure, which yields novel results on the indeterminacy and multiplicity of equilibria in the search-and-matching model. Specifically, when labor intensity of production in the centralized market is below a threshold, the economy features a unique balanced growth path along which inflation reduces growth. When labor intensity in the centralized market is above the threshold and the matching probability in the decentralized market is sufficiently high, the economy features two balanced growth paths, in which one path exhibits high growth whereas the other exhibits low growth. We find that inflation has very different effects on growth along these two paths as a result of productive government expenditure.
with Angus C. Chu, Chih-Hsing Liao and Xiangbo Liu
Forthcoming, International Review of Economics and Finance. paper
Abstract: This study explores the effects of inflation on economic growth in a two-sector monetary search-and-matching model with productive government expenditure, which yields novel results on the indeterminacy and multiplicity of equilibria in the search-and-matching model. Specifically, when labor intensity of production in the centralized market is below a threshold, the economy features a unique balanced growth path along which inflation reduces growth. When labor intensity in the centralized market is above the threshold and the matching probability in the decentralized market is sufficiently high, the economy features two balanced growth paths, in which one path exhibits high growth whereas the other exhibits low growth. We find that inflation has very different effects on growth along these two paths as a result of productive government expenditure.
Do Stronger Patents Stimulate or Stifle Innovation? The Crucial Role of Financial Development
with Angus C. Chu, Guido Cozzi, Haichao Fan and Shiyuan Pan
Published in Journal of Money, Credit and Banking, 2020, 52(5), 1305-1322. paper
Abstract: This study explores the effects of patent protection in an R&D-based growth model with financial frictions. We find that whether stronger patent protection stimulates or stifles innovation depends on credit constraints faced by R&D entrepreneurs. When credit constraints are non-binding (binding), strengthening patent protection stimulates (stifles) R&D. The overall effect of patent protection on innovation follows an inverted-U pattern. By relaxing the credit constraints, financial development stimulates innovation. Furthermore, patent protection is more likely to have a positive effect on innovation under a higher level of financial development. We consider cross-country panel regressions and find supportive evidence for this result.
with Angus C. Chu, Guido Cozzi, Haichao Fan and Shiyuan Pan
Published in Journal of Money, Credit and Banking, 2020, 52(5), 1305-1322. paper
Abstract: This study explores the effects of patent protection in an R&D-based growth model with financial frictions. We find that whether stronger patent protection stimulates or stifles innovation depends on credit constraints faced by R&D entrepreneurs. When credit constraints are non-binding (binding), strengthening patent protection stimulates (stifles) R&D. The overall effect of patent protection on innovation follows an inverted-U pattern. By relaxing the credit constraints, financial development stimulates innovation. Furthermore, patent protection is more likely to have a positive effect on innovation under a higher level of financial development. We consider cross-country panel regressions and find supportive evidence for this result.
Status Preferences and the Effects of Patent Protection: Theory and Evidence
with Shiyuan Pan and Heng-fu Zou
Published in Macroeconomic Dynamics, 2018, 22(4). paper, online appendix
Abstract: We construct a growth model with status preference to explore the effects of patents on innovation and social welfare. We find a non-monotonic effect of patent protection on innovation. Additionally, the growth-rate-maximizing degree of patent protection decreases when the strength of status preference is larger. The effect of patent protection on social welfare is ambiguous, depending on the strength of status preference. Moreover, wealth inequality widens as patent protection is reinforced. Finally, by using cross-section regression analysis, we document that a non-monotonic relationship between patent protection and economic growth is statistically significant and that the growth-rate-maximizing degree of patent protection decreases with the strength of status preference.
with Shiyuan Pan and Heng-fu Zou
Published in Macroeconomic Dynamics, 2018, 22(4). paper, online appendix
Abstract: We construct a growth model with status preference to explore the effects of patents on innovation and social welfare. We find a non-monotonic effect of patent protection on innovation. Additionally, the growth-rate-maximizing degree of patent protection decreases when the strength of status preference is larger. The effect of patent protection on social welfare is ambiguous, depending on the strength of status preference. Moreover, wealth inequality widens as patent protection is reinforced. Finally, by using cross-section regression analysis, we document that a non-monotonic relationship between patent protection and economic growth is statistically significant and that the growth-rate-maximizing degree of patent protection decreases with the strength of status preference.
Is Population Growth Bad for the Environment?
with Xiangbo Liu, Ting Levy and Chi-Chur Chao
Published in The B.E. Journal of Economic Analysis & Policy, 2017, 17(3). paper
Abstract: The relationship between economic growth and environmental degradation has been central to the debate over sustainable growth. This paper uses utility growth as an index of sustainable growth, which is positively related to economic growth and negatively related to environmental degradation. Skilled and unskilled labor are used in this economy and the population is growing over time generating growth without scale effects. The pollution growth rate is higher in a decentralized economy, whereas the sustainable growth rate is higher in an economy with a social planner. An increased rate of population growth is associated with a higher sustainable growth rate in both economies. A higher share of skilled labor is associated with a higher sustainable growth rate in a decentralized economy, while the effect of a higher share of skilled labor is ambiguous in an economy with a social planner.
with Xiangbo Liu, Ting Levy and Chi-Chur Chao
Published in The B.E. Journal of Economic Analysis & Policy, 2017, 17(3). paper
Abstract: The relationship between economic growth and environmental degradation has been central to the debate over sustainable growth. This paper uses utility growth as an index of sustainable growth, which is positively related to economic growth and negatively related to environmental degradation. Skilled and unskilled labor are used in this economy and the population is growing over time generating growth without scale effects. The pollution growth rate is higher in a decentralized economy, whereas the sustainable growth rate is higher in an economy with a social planner. An increased rate of population growth is associated with a higher sustainable growth rate in both economies. A higher share of skilled labor is associated with a higher sustainable growth rate in a decentralized economy, while the effect of a higher share of skilled labor is ambiguous in an economy with a social planner.
Analysis of Future Vehicle Energy Demand in China Based on a Gompertz Function Method and Computable General Equilibrium Model
with Tian Wu and Xunming Ou
Published in Energies, 2014, 7(11), 7454-7482. paper
Abstract: This paper presents a model for the projection of Chinese vehicle stocks and road vehicle energy demand through 2050 based on low-, medium-, and high-growth scenarios. To derive a gross-domestic product (GDP)-dependent Gompertz function, Chinese GDP is estimated using a recursive dynamic Computable General Equilibrium (CGE) model. The Gompertz function is estimated using historical data on vehicle development trends in North America, Pacific Rim and Europe to overcome the problem of insufficient long-running data on Chinese vehicle ownership. Results indicate that the number of projected vehicle stocks for 2050 is 300, 455 and 463 million for low-, medium-, and high-growth scenarios respectively. Furthermore, the growth in Chinas vehicle stock will increase beyond the inflection point of Gompertz curve by 2020, but will not reach saturation point during the period 2014C2050. Of major road vehicle categories, cars are the largest energy consumers, followed by trucks and buses. Growth in Chinese vehicle demand is primarily determined by per capita GDP. Vehicle saturation levels solely influence the shape of the Gompertz curve and population growth weakly affects vehicle demand. Projected total energy consumption of road vehicles in 2050 is 380, 575 and 586 million tonnes of oil equivalent for each scenario.
with Tian Wu and Xunming Ou
Published in Energies, 2014, 7(11), 7454-7482. paper
Abstract: This paper presents a model for the projection of Chinese vehicle stocks and road vehicle energy demand through 2050 based on low-, medium-, and high-growth scenarios. To derive a gross-domestic product (GDP)-dependent Gompertz function, Chinese GDP is estimated using a recursive dynamic Computable General Equilibrium (CGE) model. The Gompertz function is estimated using historical data on vehicle development trends in North America, Pacific Rim and Europe to overcome the problem of insufficient long-running data on Chinese vehicle ownership. Results indicate that the number of projected vehicle stocks for 2050 is 300, 455 and 463 million for low-, medium-, and high-growth scenarios respectively. Furthermore, the growth in Chinas vehicle stock will increase beyond the inflection point of Gompertz curve by 2020, but will not reach saturation point during the period 2014C2050. Of major road vehicle categories, cars are the largest energy consumers, followed by trucks and buses. Growth in Chinese vehicle demand is primarily determined by per capita GDP. Vehicle saturation levels solely influence the shape of the Gompertz curve and population growth weakly affects vehicle demand. Projected total energy consumption of road vehicles in 2050 is 380, 575 and 586 million tonnes of oil equivalent for each scenario.