TY  - JOUR
AU  - King,Mervyn A.
AU  - Robson,Mark
TI  - Endogenous Growth and the role of History
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3151
PY  - 1989
Y2  - October 1989
UR  - http://www.nber.org/papers/w3151
L1  - http://www.nber.org/papers/w3151.pdf
N1  - Author contact info:
Mervyn A. King
Governor
Bank of England
Threadneedle Street
London EC2R 8AH
 UNITED KINGDOM
Tel: 44-20-7601-4963
Fax: 44-20-7601-4953
E-Mail: mervyn.king@bankofengland.co.uk
AB  - This paper presents a model in which the realizations of stochastic tax and depreciation rates determine both the level and growth rate of output: externalities to investment - learning by watching - are characterized by diminishing returns, yielding a nonlinear "technical progress function". This results in multiple steady-state growth rates. History matters. It is possible that two economies with identical "deep" parameters and initial capital stocks may cycle around different trend growth rates, depending upon the historical path of fiscal shocks. Growth and cycles interact, and the nonlinearity means that output changes cannot be decomposed into a stochastic trend and a trend-stationary process.
ER  -