nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒02‒15
nineteen papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. Does Female Empowerment Promote Economic Development? By Matthias Doepke; Michèle Tertilt
  2. The Protestant Ethic and Entrepreneurship: Evidence from Religious Minorities from the Former Holy Roman Empire By Nunziata, Luca; Rocco, Lorenzo
  3. The Long-Term Effects of Protestant Activities in China By Chen, Yuyu; Wang, Hui; Yan, Se
  4. Resource curse: A comparative study By Azarhoushang, Behzad; Rukavina, Marko
  5. (In)equality in Education and Economic Development By Petra Sauer; Martin Zagler
  6. Heterogenous skills, growth and convergence By Dohse, Dirk; Ott, Ingrid
  7. Causes of the British Industrial Revolution By BLINOV, Sergey
  8. The World Input-Output Database: Content, Concepts and Applications By Robert Stehrer; Los, Bart; Dietzenbacher, H.W.A.; Timmer, Marcel; Gaaitzen J. de Vries
  10. Business Cycle Persistence in a Model with Schumpeterian Growth and Uncorrelated Shocks By Chase Coleman; Kerk Phillips
  11. Banks, Financial Markets and Growth in Developed Countries: a Survey of the empirical literature By Michiel Bijlsma; Andrei Dubovik
  12. Can cities be trapped in bad locations? By Guy Michaels; Ferdinand Rauch
  13. Prospective Ageing and Economic Growth in Europe By Jesus Crespo Cuaresma; Martin Lábaj; Patrik Pruzinský
  14. Environment and Growth By Horii, Ryo; Ikefuji, Masako
  15. Are Chinese Growth and Inflation Too Smooth? Evidence from Engel Curves By Emi Nakamura; Jón Steinsson; Miao Liu
  16. The future of U.S. economic growth By Fernald, John G.; Jones, Charles I.
  17. Brands As Productive Assets: Concepts, Measurement, and Global Trends By Carol A. Corrado; Janet X. Hao
  18. Economic Growth and Health Indicator in Thailand By durongkaveroj, wannaphong
  19. Fiscal Sustainability and Economic Growth in Bolivia By Rodolfo Mendez-Marcano; Jose Pineda

  1. By: Matthias Doepke; Michèle Tertilt
    Abstract: Empirical evidence suggests that money in the hands of mothers (as opposed to fathers) increases expenditures on children. From this, should we infer that targeting transfers to women is good economic policy? In this paper, we develop a non-cooperative model of household decision making to answer this question. We show that when women have lower wages than men, they may spend more on children, even when they have exactly the same preferences as their husbands. However, this does not necessarily mean that giving money to women is a good development policy. We show that depending on the nature of the production function, targeting transfers to women may be beneficial or harmful to growth. In particular, such transfers are more likely to be beneficial when human capital, rather than physical capital or land, is the most important factor of production.
    JEL: D13 J16 O10
    Date: 2014–02
  2. By: Nunziata, Luca; Rocco, Lorenzo
    Abstract: We propose a new methodology for identifying the causal effect of Protestantism versus Catholicism on the decision to become an entrepreneur. Our quasi-experimental research design exploits religious minorities' strong attachment to religious ethics and the exogenous historical determination of religious minorities' geographical distribution in the regions of the former Holy Roman Empire in the 1500s. We analyse European Social Survey data, collected in four waves between 2002 and 2008, and find that religious background has a significant effect on the individual propensity for entrepreneurship, with Protestantism increasing the probability to be an entrepreneur by around 5 percentage points with respect to Catholicism. Our findings are stable across a number of robustness checks, including accounting for migration patterns and a placebo test. We also provide an extended discussion of the assumptions' validity at the basis of our research design. This paper is one of the first attempts to identify a causal effect, rather than a simple correlation, of religious ethics on economic outcomes.
    Keywords: Entrepreneurship, Religion, Culture, Protestantism, Catholicism.
    JEL: J21 J24 Z12 Z13
    Date: 2014–02–11
  3. By: Chen, Yuyu; Wang, Hui; Yan, Se
    Abstract: Does culture, and in particular religion, exert an independent causal effect on long-term economic growth, or do culture and religion merely reflect the latter? We explore this issue by studying the case of Protestantism in China during the late nineteenth and early twentieth centuries. Combining county-level data on Protestant presence in 1920 and socioeconomic indicators in 2000, we find that the spread of Protestantism has generated significant positive effects in long-term economic growth, educational development, and health care outcomes. To better understand whether the relationship is causal, we exploit the fact that missionaries purposefully undertook disaster relief work to gain the trust of the local people. Thus, we use the frequency of historical disasters as an instrument for Protestant distribution. Our IV results confirm and enhance our OLS results. When we further investigate the transmission channels over the long historical period between 1920 and 2000, we find that although improvements in education and health care outcomes account for a sizable portion of the total effects of missionaries’ past activities on today’s economic outcomes, Protestant activities may have also contributed to long-term economic growth through other channels, such as through transformed social values. If so, then a significant amount of China’s growth since 1978 is the result not just of sudden institutional changes but of human capital and social values acquired over a longer historical period.
    Keywords: Protestantism, Economic Growth, Education, Health Care, China
    JEL: I25 N15 N35 O11 O43 Z12
    Date: 2014–01–29
  4. By: Azarhoushang, Behzad; Rukavina, Marko
    Abstract: Weak economic performance of most oil rich countries states that natural resources are more curse than blessing for these countries. Resource curse theory examines the negative effects of rich natural resources on economic growth from an economic and political perspective. Since 1960s appreciation of real domestic exchange rate (Dutch Disease) was explained as the main reason for poor economic performance of oil rich countries. But since 1990s, other causes such as long lasting ineffective institutions, corruption and rent seeking are considered to be other major political reasons behind backwardness of most resource rich countries. These political features are the corner stone of Resource Curse theory. In this paper we examine the viability of Resource Curse theory for Iran, Russia and Norway to see whether natural resources are curse or blessing for these countries. Furthermore, we compare main macroeconomic and good governance indicators from 2000 to 2010 of Iran with Turkey and Russia with China to illustrate the negative effects of oil revenue on economic performance. The result of this research shows that institutional quality has vital role in sustainable economic development. Norway as a successful oil rich country shows that efficient institutions can turn natural resource into blessing; while Iran's and Russia's experiences are a clear example of resource curse. --
    Keywords: Resource Curse,Dutch Disease,Iran,Russia,Norway,China,Turkey
    JEL: O11 O52 O53
    Date: 2014
  5. By: Petra Sauer (Department of Economics, Vienna University of Economics and Business); Martin Zagler (Department of Economics, Vienna University of Economics and Business)
    Abstract: This paper investigates the relationship between economic development and the average level of education as well as the degree of inequality in the distribution of education, respectively. Approaching this question in a dynamic panel over 60 years and 143 countries with a system GMM estimator reveals strong support for the inclusion of an interaction term between the education Gini coeffcient and average years of schooling, indicating the existence of nonlinear effects. We contribute to the literature in providing strong evidence that more schooling is good for economic growth - irrespective of its distribution - but that the coeffcient is variable and substantially declining in inequality. On the other hand, inequality is positively related to economic growth for low average levels of education, whereas highly educated countries exhibit a statistically insignificant negative relationship between inequality and economic growth. From this it follows that at least a slight increase in the degree of inequality is necessary in order to haul initially poor and low educated economies out of the poverty trap. However, as economies become educated, the effect of educational inequality mainly works indirectly. Accordingly, countries that show greater educational inequality experience lower macro economic returns to education than more equal economies, on average.
    Keywords: education, economic growth, distribution of education
    JEL: D31 I00 O15
    Date: 2014–01
  6. By: Dohse, Dirk; Ott, Ingrid
    Abstract: This paper analyzes the impact of different individual skills and their economywide distribution among heterogenous entrepreneurs on a country's catching upprocess to the world technology frontier (WTF). Highly skilled entrepreneurs qualify as either technological specialists or as broadly skilled systemic entrepreneurs. Governmental policy may address individual skills or the aggregate composition of skills in society and may be interpreted as education policy. The effectiveness of alternative growth-promoting policies is shown to depend on the relationship between a country's state of development and the prevailing composition of entrepreneurs. Countries far from the WTF benefit from increasing the share of technological specialists, whereas countries close to the WTF benefit from increasing the share of broadly skilled systemic entrepreneurs. --
    Keywords: heterogenous skills,Schumpeterian growth,catching up,education policies,systemic capacity
    JEL: O40 O30 I25
    Date: 2014
  7. By: BLINOV, Sergey
    Abstract: The Industrial Revolution happened in Britain because by the 19-th century the eternal problem faced by humankind, i.e. the problem of hunger, had been resolved on a local scale. Thanks to a unique combination of factors, Britain just overtook the other West European countries (for a short period of time in historical terms) in the understanding that the value of food “depreciates”.
    Keywords: British Industrial Revolution; malthusian trap; international trade
    JEL: F10 F16 N10 O14 O40 Q17
    Date: 2014–02–12
  8. By: Robert Stehrer; Los, Bart; Dietzenbacher, H.W.A.; Timmer, Marcel; Gaaitzen J. de Vries (Groningen University)
    Abstract: This article describes the contents and construction of the World Input-Output Database (WIOD). This database contains annual time-series of world inputoutput tables, covering the period from 1995 onwards. Underlying concepts, construction methods and data sources are considered. In addition, the WIOD provides data on labour and capital inputs for forty countries, making it useful for a wide range of applications. We illustrate this by analysing recent trends in international production fragmentation, competitiveness and patterns of specialisation. We give guidance to prudent use and discuss possible improvements and extensions.
    Date: 2014
  9. By: Konstantin Yanovskiy (Gaidar Institute for Economic Policy); Sergey Shulgin (RANEPA)
    Abstract: In this paper we tested the hypothesis of the "political" basis for the "economic" rights. We constructed our own variables of political regimes' classification for years 1820-2000. We found significant positive interdependencies between the Democracy's indicators and Economic Growth. Protection of the Private property rights requires, first and foremost, due guaranties for the personal immunity as a key precondition. Power to arrest discretionary undermines any formal guaranties of private property, low taxation benefits etc. Personal immunity should be defended even for "unpleasant" person (say, H. Ford or W. Gates) or for the chieftains' challengers (to make "rights of the meanest … respectable to the greatest"). It means the free speech; religious freedom and other "political rights" should be respected. Democracy, as political competition system weakens governments' power to break personal freedoms and property rights.
    Keywords: : Rule of Law, Rule of Force, Personal Rights, Private Property Protection, Economic Growth
    JEL: P16 P50 N40 O43
    Date: 2013
  10. By: Chase Coleman (Stern School, New York University); Kerk Phillips (Department of Economics, Brigham Young University)
    Abstract: This paper explores the merits of a DSGE model incorporating Schumpeterian type growth into an otherwise standard RBC model similar to the one in Phillips and Wrase (2006). We consider a model with two exogenous shocks. The first is a standard productivity shock. The second is an aggregate shock to the stock of basic knowledge and arrives as a Poisson process with an arrival rate influenced by economy-wide spending on R\&D. We show that this model is capable of generating both an observed total factor productivity and GDP series that is autocorrelated, even when all the shock processes are serially uncorrelated. We present empirical evidence that the driving process in our model is consistent with the behavior of the U.S. economy
    Keywords: autocorrelation, dynamic stochastic general equilibrium, business cycles, technology persistence, Schumpeterian, economic growth, GDP, TFP
    JEL: C63 E32 E37
    Date: 2014–02
  11. By: Michiel Bijlsma; Andrei Dubovik
    Abstract: We review the literature on finance and growth with a focus on developed countries We find little evidence that increases in the traditional proxies for financial development will enhance growth in these countries. Potential causes include: decreasing returns, misallocation of credit, difficulties in measuring efficient financial development, and increasing macroeconomic or systemic risk. To stimulate efficient financial intermediation, policy makers should focus on lending to firms instead of consumers; avoid too high concentration levels; and keep government ownership of banks at a minimum.
    JEL: G01 G38
    Date: 2014–02
  12. By: Guy Michaels; Ferdinand Rauch
    Abstract: After the fall of the Roman Empire, urban life in France became a shadow of its former self, but in Britain it completely disappeared. Guy Michaels and Ferdinand Rauch use these contrasting experiences as a natural experiment to explore the impact of history on economic geography - and what leads cities to get stuck in undesirable locations.
    Keywords: Economic Geography, Economic History, Path Dependence, Transportation
    JEL: R11 N93 O18
    Date: 2014–02
  13. By: Jesus Crespo Cuaresma (Department of Economics, Vienna University of Economics and Business); Martin Lábaj (Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava); Patrik Pruzinský (Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava)
    Abstract: We assess empirically the role played by prospective ageing measures as a predictor of income growth in Europe. We show that prospective ageing measures which move beyond chronological age and incorporate changes in life expectancy are able to explain better the recent long-run growth experience of European economies. The improvement in explanatory power of prospective ageing indicators as compared to standard measures based on chronological age is particularly relevant for long-run economic growth horizons.
    Keywords: Economic growth, ageing, prospective age, old age dependency ratio
    JEL: I15 O15 O52
    Date: 2014–01
  14. By: Horii, Ryo; Ikefuji, Masako
    Abstract: This paper examines the implications of the mutual causality between environmental quality and economic growth. While economic growth deteriorates the environment through increasing amounts of pollution, the deteriorated environment in turn limits the possibility of further economic growth. In a less developed country, this link, which we call "limits to growth," emerges as the "poverty-environment trap," which explains the persistent international inequality both in terms of income and environment. This link also threatens the sustainability of the world's economic growth, particularly when the emission of greenhouse gases raises the risk of natural disasters. Stronger environmental policies are required to overcome this link. While there is a trade-off between the environment and growth in the short run, we show that an appropriate policy can improve both in the long run.
    Keywords: Environmental Kuznets Curve, Limits to Growth, Poverty-Environment Trap, Sustainability, Natural Disasters
    JEL: O41 O44 Q54 Q56
    Date: 2014–02
  15. By: Emi Nakamura; Jón Steinsson; Miao Liu
    Abstract: China has experienced remarkably stable growth and inflation in recent years according to official statistics. We construct alternative estimates using detailed information on Chinese household purchasing patterns. As households become richer, a smaller fraction of total expenditures are spent on necessities such as grain and a larger fraction on luxuries such as eating out. We use systematic discrepancies between cross-sectional and time-series Engel curves to construct alternative estimates of Chinese growth and inflation. Our estimates suggest that official statistics present a smoothed version of reality. Official inflation rose in the 2000's, but our estimates indicate that true inflation was still higher and consumption growth was overstated over this period. In contrast, inflation was overstated and growth understated during the low-inflation 1990's. Similar patterns emerge from the data whether we base our estimates on major categories such as food or clothing as a fraction of total expenditures or subcategories such as grain as a fraction of food expenditures or garments as a fraction of clothing expenditures.
    JEL: D12 E21 E31 O11
    Date: 2014–02
  16. By: Fernald, John G. (Federal Reserve Bank of San Francisco); Jones, Charles I. (Stanford Graduate School of Business; NBER)
    Abstract: Modern growth theory suggests that more than 3/4 of growth since 1950 reflects rising educational attainment and research intensity. As these transition dynamics fade, U.S. economic growth is likely to slow at some point. However, the rise of China, India, and other emerging economies may allow another few decades of rapid growth in world researchers. Finally, and more speculatively, the shape of the idea production function introduces a fundamental uncertainty into the future of growth. For example, the possibility that artificial intelligence will allow machines to replace workers to some extent could lead to higher growth in the future.
    Date: 2014–01
  17. By: Carol A. Corrado (The Conference Board, New York, United States of America); Janet X. Hao (The Conference Board, New York, United States of America)
    Abstract: The paper looks at brands from an economic point of view. First, we define concepts and set out this approach. Second, we analyze the conditions under which brands are long-lived productive assets and contribute to economic growth. Third, we review and improve the measurement of investment in brands. We find that a productive role for brands is consistent with assumptions used in the economic analysis of innovation. Productivity decompositions using the intangibles framework support brand as a contributor to economic growth. We then develop (1) a new U.S. series for brand investment to cover all marketing, including “in-house” investment, and (2) a harmonized global indicator of brand investment covering 63 countries. We find that brand investment held up relatively well in the U.S. during the Great Recession and its aftermath whereas measures based mainly on purchased advertising services send a different signal. Finally we offer an analysis of economic development that suggests branding rises with growth and provide econometric evidence showing a significant positive relationship between the rate of brand investment and level of economic development.
    Keywords: Brands and brand equity, intangible investment, innovation, economic growth and development, national accounts and economic measurement.
    Date: 2014–01
  18. By: durongkaveroj, wannaphong
    Abstract: This study aimed at estimating the relationship between economic growth measured by per capita Gross National Income (GNI) and health indicators including life expectancy and mortality rate under 5 in Thailand between 1980 - 2011 using Cochrane - Orcutt Model.The results from revealed that only mortality rate under 5 has a strong relationship with an economic growth. Thus, the reform in medical and sanitation system in Thailand will be able to stimulate the economic prosperity and lead to development further.
    Keywords: health indicator, economic growth, cochrane orcutt model
    JEL: I15 I18 O1
    Date: 2014–02–06
  19. By: Rodolfo Mendez-Marcano; Jose Pineda
    Abstract: In this paper we analyze the role played by fiscal sustainability shocks on the Bolivian economic growth performance. To do this, we impose restrictions on a VAR for the Bolivian economy that allow us to identify fiscal sustainability shocks. We argue that imposing long run identification restrictions in our tructural VAR is a new (applied to fiscal issues) and useful way to identify the macroeconomic impact of shocks on fiscal sustainability. Our results show a significant lost in the level of GDP in the Bolivian economy as a consequence of the sequence of adverse fiscal sustainability shocks this economy has experienced. Although, fiscal sustainability shocks have not permanent effect on Bolivia’s economic growth, the fact that adverse fiscal sustainability shocks has occurred during the period studied (in a significant way at least during the late 70s early 80s and at the late 90s early 2000s) have negatively affected Bolivian economic growth. Our results also show that inflation has been affected by fiscal sustainability shocks, especially the adverse shocks experienced during the period from 1977 to 1986, which ended in the hyperinflation in 1985.
    Keywords: SVAR; identifying restrictions; small open economies; fiscal policy; debt
    JEL: E32 E62 F41 H62 H63 O11
    Date: 2014–02

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