nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒01‒17
twelve papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. The Fertility Transition in the US: Schooling or Income? By Casper Worm Hansen; Peter Sandholt Jensen; Lars Lønstrup
  2. Technological Progress and the Earnings of Older Workers By Yuriy Gorodnichenko; John Laitner; Jae Song; Dmitriy Stolyarov
  3. Inequality, Ethnicity and Civil Conflict By John D. Huber; Laura Mayoral
  4. Spatial Takeoff in the First Industrial Revolution By Alex Trew
  5. Informality and long-run growth By Frédéric DOCQUIER; Tobias MÜLLER; Joaquín NAVAL
  6. The Uzawa-Lucas Growth Model with Natural Resources By Neustroev, Dmitry
  7. Abatement R&D, Market Imperfections, and Environmental Policy in an Endogenous Growth Model By Chu, Hsun; Lai, Ching-Chong
  8. Is Public Debt Growth-Enhancing or Growth-Reducing? By Real Arai; Takuma Kunieda; Keigo Nishida
  9. “Tracking positive and negative effects of inequality on long-run growth” By David Castells-Quintana; Vicente Royuela
  10. Institutions and economic growth: Summary and synthesis By Szirmai, Adam
  11. Relationship between Remittances and Economic Growth in Bangladesh: An Econometric Study By Kanchan Datta; Bimal Sarkar
  12. Does Financial Liberalization, Spur Economic Growth and Poverty Reduction in Six Sub-Saharan African Countries; Panel Unit Root and Panel Vector Error Correction Tests By Dandume, Muhammad Yusuf; A.C., Dr.Malarvizhi

  1. By: Casper Worm Hansen (Department of Economics and Business, Aarhus University, Denmark); Peter Sandholt Jensen (University of Southern Denmark); Lars Lønstrup (University of Southern Denmark)
    Abstract: Schooling. This study estimates the respective contributions of schooling and income in determining the fertility transition within the US states between 1840 and 1980. While evidence suggests that both relationships are negative and statistically signi?cant, the most robust determinant of the transition is the development of human capital as measured by years of schooling. This empirical fact corroborates the use of the quantity-quality trade-off mechanism in theoretical models to generate the transition from economic stagnation to growth.
    Keywords: Fertility transition, Schooling, Income, Q-Q trade-off US states
    JEL: I2 J11 N3 O11
    Date: 2014–01–13
  2. By: Yuriy Gorodnichenko (University of California - Berkley); John Laitner (University of Michigan); Jae Song (Social Security Administration); Dmitriy Stolyarov (Dmitriy Stolyarov)
    Abstract: Economists’ standard model assumes that improvements in total factor productivity (TFP) raise the marginal product of labor for all workers evenly. This paper uses an earnings dynamics regression model to study whether, in practice, older workers benefit less from TFP growth than younger workers. We utilize panel earnings data from the Social Security Administration’s Continuous Work History Sample. The data include workers of all ages, and we use annual figures for 1950-2004. Our first specification relies on BLS measurements of TFP. Our second model develops a new TFP measure using a principal components analysis. We find that although the earnings of younger workers track TFP growth 1-for-1, the earnings of older workers do not: we find, for example, that a 60-year-old male’s earnings grow only 85-90% as fast as TFP. Nevertheless, our analysis implies that in an economy with an aging labor force, gains from experience tend to outweigh older workers’ inability to benefit fully from TFP improvements.
    Date: 2013–10
  3. By: John D. Huber; Laura Mayoral
    Abstract: Although economic inequality has long been viewed as a cause of civil conflict, existing research has not found robust empirical support for this relationship. This study explores the connections between inequality and civil conflict by focusing on the mediating role of ethnic identity. Using over 200 individual-level surveys from 89 countries, we provide a new data set with country- and group-level measures of inequality within and across ethnic groups. We then show that consistent with Esteban and Ray’s (2011) argument about the need for labor and capital to fight civil wars, at both the country and group level, there is a strong positive association between within-group inequality and civil conflict. We do not, however, find support for previous arguments that inequality across ethnic groups should be associated with the incidence or intensity of civil conflict. By breaking down the measures of inequality into group-level components, the analysis helps explain why it is difficult to identify a relationship between general inequality and conflict. More generally, it highlights the limitations in cross-national research associated with drawing substantive conclusions by relying on measures of overall inequality, like the Gini.
    Keywords: ethnicity, inequality, civil conflict, gini decomposition, within-group inequality, between-group inequality, fractionalization
    JEL: D63 D74 J15 O15
    Date: 2013–10
  4. By: Alex Trew (University of St Andrews)
    Abstract: Using the framework of Desmet and Rossi-Hansberg (forthcoming), we present a model of spatial takeoff that is calibrated using spatially-disaggregated occupational data for England in c.1710. The model predicts changes in the spatial distribution of agricultural and manufacturing employment which match data for c.1817 and 1861. The model also matches a number of aggregate changes that characterise the first industrial revolution. Using counterfactual geographical distributions, we show that the initial concentration of productivity can matter for whether and when an industrial takeoff occurs. Subsidies to innovation in either sector can bring forward the date of takeoff while subsidies to the use of land by manufacturing firms can significantly delay a takeoff because it decreases spatial concentration of activity.
    Keywords: Endogenous growth, first industrial revolution, economic geography, structural change.
    JEL: O11 O18 O33 N13 N93 R12
    Date: 2014–01–01
  5. By: Frédéric DOCQUIER (FNRS and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Tobias MÜLLER (University of Geneva, Switzerland); Joaquín NAVAL (Universitat Autònoma de Barcelona, Spain)
    Abstract: One of the most salient features of developing economies is the existence of a large informal sector. This paper uses quantitative theory to study the dynamic implications of informality on wage inequality, human capital accumulation, child labor and long-run growth. Our model can generate transitory informality equilibria or informality-induced poverty traps. Its calibration reveals that the case for the poverty-trap hypothesis is strong: although informality serves to protect low-skilled workers from extreme poverty in the short-run, it prevents income convergence between developed and developing nations in the long run. Sudden elimination of informality would induce severe welfare losses for several generations on the transition path. Hence, we examine the effectiveness of different development policies to exit the poverty trap. Our numerical experiments show that using means-tested education subsidies is the most cost-effective single policy option. However, for longer time horizons, or as the economy gets closer to the poverty trap threshold, combining means-tested education and wage subsidies is even more effective.
    Keywords: informality, development, education, child labor, inequality
    JEL: O11 O15 O17
    Date: 2013–12–23
  6. By: Neustroev, Dmitry
    Abstract: This article offers the modification of the Uzawa-Lucas growth model. The model also includes natural resources as a factor of production. The necessary and sufficient conditions for this model are considered. Growth rates of the main macroeconomic indicators along balanced growth path are obtained. The analysis of influence of natural resources on economic growth along balanced growth path is considered.
    Keywords: Uzawa-Lucas model, human capital, natural resources
    JEL: C61 O41
    Date: 2013
  7. By: Chu, Hsun; Lai, Ching-Chong
    Abstract: This paper develops an endogenous growth model featuring environmental externalities, abatement R&D, and market imperfections. We compare the economic performances under three distinct regimes that encompass public abatement, private abatement without tax recycling, and private abatement with tax recycling. It is found that the benefit arising from the private conduct of abatement will be larger if the degree of the firms’ monopoly power is greater. With a reasonably high degree of monopoly power, a mixed abatement policy by which the government recycles environmental tax revenues to subsidize the private abatement R&D is a plausible way of reaching the highest growth rate and welfare.
    Keywords: abatement R&D, market imperfections, endogenous growth
    JEL: H23 O32 O44 Q56
    Date: 2013–11
  8. By: Real Arai (Graduate School of Social Sciences, Hiroshima University); Takuma Kunieda (Department of Economics and Finance,City University of Hong Kong); Keigo Nishida (Faculty of Economics, Fukuoka University)
    Abstract: To understand mixed evidence provided by empirical studies for the relationship between the accumulation of public debt and economic growth, it is necessary to consider not only the crowd-out effect of public debt on economic growth but also the growth-enhancing crowd-in effect that cannot be uncovered by the traditional theoretical achievements. We develop a dynamic general equilibrium model with infinitely lived agents and derive an inverted U-shaped relationship between the accumulation of public debt and economic growth. The analysis focuses on both crowd-out and crowd-in effects that public debt has on private investment in a financially constrained economy and clarifies the mechanism inducing the inverted U-shaped relationship in the growth process. When the public debt-to-GDP ratio is below a certain threshold level, the crowd-in effect dominates the crowd-out effect and the accumulation of public debt promotes economic growth. When the public debt-to-GDP ratio exceeds the threshold level, the accumulation of public debt begins to hinder economic growth with the crowd-out effect dominating the crowd-in effect.
    Keywords: Economic growth; Public debt; Crowd-in effect; Financial market imperfections
    JEL: O41 E62
    Date: 2014–01
  9. By: David Castells-Quintana (Faculty of Economics, University of Barcelona); Vicente Royuela (Faculty of Economics, University of Barcelona)
    Abstract: Despite extensive research, there is still controversy on the effects of income inequality on economic growth. The literature proposes several transmission channels through which these effects may take place, and even the existence of two different forms of inequality. However, empirical studies have generally not distinguished between these channels, nor have their analyses included a consideration of the two forms of inequality and their separate effects on growth. In this paper we review the theory and the evidence on the different transmission channels through which inequality influences growth. We contribute to the literature by using a system of recursive equations, following a control function approach, to empirically assess the relevance of these channels and to differentiate between two forms of inequality. In this way we have captured in a single model not only a negative effect, but also a positive effect of inequality on long-run economic growth.
    Keywords: inequality, economic growth, development. JEL classification: O1, O4
    Date: 2014–01
  10. By: Szirmai, Adam (UNU-MERIT / MGSoG)
    Abstract: This paper provides a review and synthesis of the findings of the second phase of a research project on institutions and long-run economic performance. It discusses research findings in five areas, namely (1) the relationship between institutional characteristics and the duration of economic slumps; (2) the relative importance for growth of institutions, trade openness and geography; (3) the determinants and consequences of state capacities; (4) the interactions between institutions, foreign direct investment and domestic investment; and (5) the relative contributions of growth and inequality to poverty reduction. The paper concludes with recommendations for future research in the field of institutions and economic development.
    Keywords: Institutions, Economic Growth, State Capacity, Foreign Direct Investment, FDI, Poverty
    JEL: E02 O43 B52 O10
    Date: 2013–12–31
  11. By: Kanchan Datta (University of North Bengal); Bimal Sarkar (Bangabasi Morning College)
    Abstract: In Bangladesh, remittances have increased sharply over the last 20 years and amount since 2008 to over 10 percent of GDP. While remittances can foster growth and development as well as prevent balance of payment crises, they can also have a negative impact on growth if used for conspicuous consumption or unproductively. Recipients of remittance can become highly dependent on the easy money, causing them to reduce their efforts and or their participation in the labor market, which would affect economic growth negatively. In this paper an attempt is made to analyze the impact of remittances on economic growth in the Bangladeshi economy, using time series econometric techniques, specifically, the auto regressive distributed lag (ARDL) framework.
    Keywords: remittances, growth, Bangladesh, ARDL, ECM
    Date: 2014–01
  12. By: Dandume, Muhammad Yusuf; A.C., Dr.Malarvizhi
    Abstract: This paper examines the linkage among financial liberalization, economic growth and poverty reduction in Sub-Saharan African countries (SSA). The study applies the recent panel Co-integration and vector error correction mechanism to address the heterogeneity and cross-border interdependence over the period of 1980 to 2010. The results reveal that economic growth is positively associated with poverty reduction and financial liberalization coefficients are positively related to economic growth. It implies that financial liberalization causes economic growth. However, the coefficients of financial liberalization are not significant in the poverty equation suggests that financial liberalization does not have direct impact on poverty reduction in the six Sub-Saharan African countries. This implies that the financial liberalization effects of poverty are upon contingent on the distributional changes introduced by the growth and the configuration of institutions and policies that supported the liberalization process and particularly, the existence or otherwise of good governance.
    Keywords: Liberalization, poverty, economic growth, financial repression
    JEL: G0
    Date: 2014–02

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