This thesis analyzes the two economies of South Tyrol and Luxembourg, questioning whether their economic growth can be explained by concepts of endogenous growth theories.
South Tyrol and Luxembourg are two quite similar economies in terms of size, population, cultural diversity and scarcity of natural resources, but yet very different in matters of economic growth, income per capita and economic specialization, which makes them an interesting sample to test for growth factors.
Since endogenous growth theories, in contrast to neoclassical conceptions, provide a much broader range of tools to handle endogenous technological change, innovation and other factors, they are better suited to analyze growth factors.
Therefore, this thesis first draws a summary on the evolution of endogenous growth theories including an outline of the most important contributions. It is shown that the factor “human capital” plays a major role in most models. Subsequently, the second part of the thesis deals with the economies of South Tyrol and Luxembourg in detail, evaluates historical economic growth, identifies tourism and financial intermediation as their main driving forces and asks whether human capital could be the moving power behind them.
The method of choice for measuring is the country-specific data of the Human Development Index, which is issued every year by the United Nations. They reveal that human capital formation cannot be the answer to the discrepancy between the growth rates of both economies. Consequently, alternative explanations outside endogenous growth theories are sought. Potential causes could be foreign income growth in the case of South Tyrol, and dynamic capabilities together with a capacity of attracting human resources in the case of Luxembourg.
Table of Contents
1 Introduction
1.1 Object of Analysis: Growth in South Tyrol & Luxembourg
1.2 Structure
2 The Evolution of Endogenous Growth Theories
2.1 Neoclassical Growth Theory with Exogenous Growth
2.1.1 The Solow-Model
2.1.2 Shortcomings of Neoclassical Conceptions
2.1.2.1 Assumptions
2.1.2.2 Convergence Controversy
2.2 The Origins of Endogenous Growth Models
2.2.1 The Passing of Perfect Competition – 5 Facts
2.2.2 Learning by Doing – Arrow’s Approach
2.2.3 Adding Human Capital – Lucas’ Approach
2.2.4 Knowledge Spillovers & Increasing Returns – Romer’s Approach
2.2.4.1 Romer’s Work of 1986
2.2.4.2 Romer’s Work of 1990
2.2.5 Neo-Schumpeterian Growth Models
2.3 Critical Reflections on Endogenous Growth Theory
2.3.1 Critique
2.3.2 Practical Relevance
3 Matching Growth in South Tyrol & Luxembourg
3.1 Background Facts
3.1.1 South Tyrol
3.1.2 Luxembourg
3.2 Data & Methods
3.3 Historical Growth Observations
3.4 Composition of GDP’s & Characterization of the Economies
3.4.1 Tourism in South Tyrol
3.4.2 Financial Intermediation in Luxembourg
3.5 Analysis of One Major Growth Factor Suggested by EGT – Human Capital
3.5.1 Mahroum’s 3D Framework
3.5.2 The Cumulative Growth of Human Capital
3.5.3 The Human Development Index
3.6 Alternative Explanations outside Endogenous Growth Theories
3.6.1 The Case of South Tyrol
3.6.2 The Case of Luxembourg
4 Conclusion
Objectives and Research Themes
This thesis investigates the economic growth trajectories of South Tyrol and Luxembourg to determine whether these can be explained by endogenous growth theories, particularly focusing on the role of human capital. The study contrasts these two economically comparable yet distinct regions to identify specific growth drivers.
- Evolution and theoretical framework of endogenous growth models.
- Empirical analysis of growth data in South Tyrol and Luxembourg.
- Role of human capital using the Human Development Index and Mahroum's 3D Framework.
- Alternative growth explanations, specifically tourism-led growth and dynamic capabilities.
Excerpt from the Book
3.4.1 Tourism in South Tyrol
Tourism is often called the „Engine of the South Tyrolean economy“. In their paper “Dynamic Model of Economic Growth in a Small Tourism Driven Economy”, Schubert and Brida (2011) pointed out that international tourism is recognized to have positive effects on long-run economic growth through various channels. First, it is a significant foreign exchange earner, allowing to pay for imported capital goods or basic inputs used in the production process. Second, tourism plays a major role in spurring investments in new infrastructure and competition between local firms and firms in other tourist countries. Third, it stimulates other economic industries as shown above by direct, indirect and induced effects. Fourth, tourism contributes to generate employment and increases income. Fifth, tourism causes a positive exploitation of economies of scale in regional firms. And finally, tourism is an important factor of diffusion of technical knowledge, stimulation of R&D and accumulation of human capital. These beliefs that tourism can indeed promote or cause long-run economic growth are known in the literature as the Tourism Led Growth Hypothesis (TLGH).
However, it seems very complex to determine the impact of this sector quantitatively. Especially since tourism per se is not a real production sector. There are no industries that “produce” tourism, even if there are activities that depend directly or indirectly on tourism demand.
The “tourism-satellite-account” (TSA), a concept to display all kinds of tourism in monetary values, allows for revealing the relations between tourism demand and production of sectors. In contrast to “classic” tourism statistics, which collect data about the arrivals and overnight stays of hotels and restaurants, the tourism-satellite-account also maps one-day-visits (which account for 1/3 of all visits to South Tyrol) as well as overnight-stays at secondary residences or at a friend’s home (which account for 15% of all overnight-stays) (ASTAT 2012).
Summary of Chapters
1 Introduction: Introduces the research question concerning the applicability of endogenous growth theories to South Tyrol and Luxembourg, outlining the structure and methodology.
2 The Evolution of Endogenous Growth Theories: Provides a comprehensive overview of the shift from neoclassical models to endogenous growth theories, discussing key authors and conceptual pillars like human capital and R&D.
3 Matching Growth in South Tyrol & Luxembourg: Compares the two regions empirically, identifying their specific economic structures, the role of human capital, and alternative growth drivers like tourism and financial intermediation.
4 Conclusion: Summarizes findings, noting that while human capital is a significant factor in some models, alternative variables like foreign income and dynamic capabilities are essential for understanding specific growth patterns.
Keywords
Endogenous Growth Theory, Human Capital, South Tyrol, Luxembourg, GDP, Tourism, Financial Intermediation, Mahroum’s 3D Framework, Human Development Index, Dynamic Capabilities, Creative Destruction, Neoclassical Growth, Innovation, Economic Development, Growth Drivers.
Frequently Asked Questions
What is the primary subject of this thesis?
The thesis analyzes the economic growth of South Tyrol and Luxembourg to see if their performance can be explained by endogenous growth theories.
Why were South Tyrol and Luxembourg chosen for this study?
They are highly comparable due to their small size, scarcity of natural resources, similar population levels, and multilingual populations, yet they exhibit significant differences in economic structure and performance.
What is the core research question?
The primary objective is to identify if growth in these regions is driven by factors suggested by endogenous growth theory, with a specific focus on human capital.
What scientific methodology is applied?
The thesis utilizes a comparative analysis, reviewing historical growth data, composition of GDP, and measuring human capital through the Human Development Index and Mahroum’s 3D Framework.
What does the main body of the work cover?
The main body consists of two parts: a theoretical review of endogenous growth models (from Solow to Neo-Schumpeterian approaches) and an empirical analysis comparing the two regions.
Which keywords best characterize the research?
Key terms include Endogenous Growth Theory, Human Capital, Tourism-led growth, Financial Intermediation, and Dynamic Capabilities.
Why did the HDI analysis not explain the growth differences fully?
The HDI measures education and health within a country, but it failed to capture the international dimension of human capital attraction, which is a major driver for the Luxembourgish economy.
What alternative explanation is proposed for South Tyrol's growth?
South Tyrol's growth is attributed to the Tourism Led Growth Hypothesis, where growth is driven by the inflow of foreign income and high demand for tourism services.
What is the role of 'dynamic capabilities' in Luxembourg?
It represents the ability of the economy to reconfigure its internal and external competencies, allowing it to act as a leading financial hub through rapid adaptation to market changes.
- Citar trabajo
- Marlene Bleicher (Autor), 2013, Can Endogenous Growth Theories Explain Growth in South Tyrol and Luxembourg?, Múnich, GRIN Verlag, https://www.grin.com/document/267592
