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on Economic Growth |
| By: | Daron Acemoglu; Francisco A. Gallego; James A. Robinson |
| Abstract: | In this paper we revisit the relationship between institutions, human capital and development. We argue that empirical models that treat institutions and human capital as exogenous are misspecified both because of the usual omitted variable bias problems and because of differential measurement error in these variables, and that this misspecification is at the root of the very large returns of human capital, about 4 to 5 times greater than that implied by micro (Mincerian) estimates, found in some of the previous literature. Using cross-country and cross-regional regressions, we show that when we focus on historically-determined differences in human capital and control for the effect of institutions, the impact of institutions on long-run development is robust, while the estimates of the effect of human capital are much diminished and become consistent with micro estimates. Using historical and cross-country regression evidence, we also show that there is no support for the view that differences in the human capital endowments of early European colonists have been a major factor in the subsequent institutional development of these polities. |
| Keywords: | Economic Development, Institutions, Human Capital |
| JEL: | I25 P16 O10 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:449&r=gro |
| By: | Kizuku Takao (Graduate School of Economics, Osaka University) |
| Abstract: | This paper provides a theoretical explanation for why the presence of asset bubbles can lead to higher economic growth in concurrence with high consumption by using a simple endogenous growth model. In the model economy, long-lived valuemaximizing firms continuously improve the quality of their specific products through in-house R&D, while at the same time new firms also enter into the market. Due to an absence of intergenerational altruism, asset bubbles can exist as pyramid schemes whose value is not backed by fundamental value. The presence of asset bubbles then leads to higher interest rates. This requires product proliferation to be impeded, which would result in an increase in the demand for differentiated goods at the level of an individual firm. A larger scale of production at the level of an individual firm can encourage in-house R&D of firms and promote economic growth. |
| Keywords: | Bubbles, R&D, Overlapping generations |
| JEL: | E44 O32 O41 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1411&r=gro |
| By: | Neil Lee; Paul Sissons; Ceri Hughes; Anne Green; Gaby Atfield; Duncan Adam; Andrés Rodríguez-Pose |
| Abstract: | Cities are drivers of economic growth, but how does growth affect poverty? This report explores the connection between growth and poverty in UK cities, and examines how strategies for economic growth and poverty reduction can be aligned. The report finds that: - There is no guarantee that economic growth will reduce poverty – in some economically expanding cities poverty has stayed the same or increased; - Employment growth has the greatest impact on poverty, but if jobs are low-paid or go to workers living outside the area, the impact is minimal; - Increased output risks worsening poverty because it can lead to increases in the cost of living; - Some cities are tackling this by promoting employment in expanding sectors or providing training for disadvantaged groups so they can access opportunities associated with major infrastructure projects. |
| JEL: | N0 R14 J01 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:55799&r=gro |
| By: | Michael Carter; John Morrow |
| Abstract: | Abstract Commentators on the `East Asian Miracle' of inclusive growth have often pointed toward shared rural growth policies. But why were these policies not chosen elsewhere? This paper models voters who invest in either subsistence or a complex technology in which public goods complement private capital. Investment and technology choices vary with wealth and the level of public goods enforced by political lobbies. Outcomes depend on the strength of the incipient middle class who bolster political incentives through contributions. Economies with a stronger middle class due to lower inequality or lower risk may thereby sustain higher productivity through public good provision. |
| Keywords: | Poverty traps, political economy, inequality, lobby formation |
| JEL: | O1 D2 H4 Q1 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1259&r=gro |
| By: | Françoise Lemoine; Grégoire Mayo; Sandra Poncet; Deniz Ünal |
| Abstract: | Since the mid-2000s, the center of gravity of China's economic growth has shifted from the coastline to the inland and the gap in GDP per capita between the two areas has narrowed. This macroeconomic catch-up reflects, with a time lag, the convergence process which has been at work in manufacturing industry since the end of the 1990s and suggests that China is becoming increasingly integrated in terms of technological level. This pattern is in line with a process whereby the inland catches up the labor productivity level of the coast thanks to the transfer of technology and capital from these most advanced regions. |
| Keywords: | China;Regional inequality;Manufacturing industry;Convergence;Growth |
| JEL: | O14 O25 O53 R12 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2014-04&r=gro |
| By: | Winters, L. Alan (Asian Development Bank Institute) |
| Abstract: | This paper covers threes issues: first, defining and measuring inclusive growth; second, the relationship between international trade and inequality; and third, the links between infrastructure and inequality. Both international trade and infrastructure make it easier for people to exchange goods and services and to increase income by allowing specialization, economies of scale, variety, etc. The gains are important not only in aggregate, but also at an individual level, and different people’s ability to take advantage of them varies. Hence each can increase inequality. Critical to sharing the gains from trade is mobility—specifically labor mobility, which determines the capacity of people to move from areas, sectors, skills, or firms of low or declining opportunity to those of higher opportunity. In the context of inclusive growth, this constitutes a challenge. However, the answer should not be to eschew opening up the economy or building infrastructure, but to do so in an informed way and seek to undertake complementary policies that help the less well-off take advantage of them. |
| Keywords: | trade; infrastructure; inequality; labor mobility; trade opening; globalization |
| JEL: | F16 H54 |
| Date: | 2014–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0464&r=gro |
| By: | Kizuku Takao (Graduate School of Economics, Osaka University) |
| Abstract: | Tax changes are often announced before the implementations and are not permanent but only temporary. R&D firms will optimally adjust their investment decision to a tax schedule accordingly. This paper analyzes how anticipated and temporary tax changes dynamically affect the innovation activities. For the purpose, we consider adjustment costs for the investment process and allow firms to make a forward looking investment decision in the framework of an R&D-based endogenous growth model. Calibrating the model with U.S. data, we obtain new insights on how to design the corporate taxation policy. A dividend tax cut is not an effective policy instrument irrespective of how it is implemented. On the other hand, a capital gains tax cut and a rise of the R&D tax credit rate are an effective policy instrument irrespective of how they are implemented. However, the implementation lags of these tax changes worsen the effectiveness of them. |
| Keywords: | Fiscal policy, R&D, Economic growth |
| JEL: | E62 O32 O41 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1410&r=gro |
| By: | Gani Aldashev (Center for Research in the Economics of Development, University of Namur and ECARES, ULB); Giorgio Zanarone (Colegio Universitario de Estudios Financieros (CUNEF)) |
| Abstract: | We model the State as a self-enforcing agreement over the use of force. A principal contracts with an agent, and a powerful ruler enforces their contracts through a mix of monetary fines and coercion. If the ruler fails to enforce, or if he uses his power to expropriate, all parties revert to low production forever after. Our model has two important implications. First, a better coercion technology moves the optimal system from private ordering, where contracts are enforced by the threat of termination, to the State, where they are enforced by the threat of coercion. This is consistent with the historical correlation between improvements in coercion and the transition from the Law Merchant enforcement system to the State. Second, contract enforcement and non-expropriation are complementary inputs in the State, in the sense that improvements in the enforcement technology increase the agents effort only if the ruler has limited expropriation power, so that the rulers incentive constraint on contractual enforcement is binding. This result relates to the Acemoglu and Johnson (2005) finding that constraints on rulers have affected the development of nations more than improvements in contractual enforcement. Using their data we find that, consistent with our model, contractual enforcement does affect development, but only when the rulers expropriation power is sufficiently constrained. |
| Keywords: | Enforcement, Punishment, Coercive power, Relational contracts, State |
| JEL: | D23 K42 P37 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:nam:wpaper:1403&r=gro |
| By: | Karen Davtyan (Faculty of Economics, University of Barcelona) |
| Abstract: | The interrelation among economic growth, income inequality, and fiscal performance is very complex. The paper provides the analysis of the interrelations among these variables jointly by the structural VAR methodology, examining also transmission channels among them. This approach allows exploring dynamic interactions among them and feedback effects on each other. The empirical analysis is implemented for the Anglo-Saxon countries, the UK, the USA, and Canada. We find that income inequality has negative effect on economic growth in the case of the UK. The effect is positive in the cases of the USA and Canada. The increase in income inequality worsens fiscal performance for all the countries. |
| Keywords: | economic growth, income inequality, fiscal performance, VAR JEL classification: C32, D31, E62, O47 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:201405&r=gro |
| By: | Cuong Le Van; Cagri Saglam; Agah Turan |
| Abstract: | We consider an economy in which the technology exhibits nonconvexities due to fixed costs associated with production. Taking into account the incentives for investment to decrease the fixed costs, we characterize the circumstances under which an underdeveloped economy can catch up with the developing ones. We show that it is optimal to get rid of the fixed costs inherent in production at a finite period of time so that the economy will eventually converge to a positive steady state level of per capita income independent of the initial level of capital stock. Indeed, we obtain that even though the income disparities may be very persistent and can be perceived as poverty traps, all economies would ultimately converge to the same steady state level of per capita income. |
| Keywords: | Optimal Growth, Nonconvex technology, Poverty trap |
| JEL: | C61 O41 O47 |
| Date: | 2014–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-123&r=gro |
| By: | Gehringer, Agnieszka; Martínez-Zarzoso, Inmaculada; Nowak-Lehmann Danzinger, Felicitas |
| Abstract: | This paper examines the development and drivers of total factor productivity (TFP) in the manufacturing sector for a panel of 17 EU countries over the period of 1995-2007. Recent panel data estimation techniques are used in a twofold approach. First, we estimate aggregated and sectoral TFP for 17 EU countries by means of the augmented mean group estimator to control for endogeneity, cross-section dependence and heterogeneous production technology. Second, we investigate the relative importance of the drivers of predicted TFP, namely Foreign Direct Investment (FDI), investment in Information and Communication Technologies (ICT), human capital, R&D, trade openness and rationalization efforts. The results confirm that rationalization, human capital and ICT are the main drivers of TFP. -- |
| Keywords: | sectoral TFP,heterogeneous production functions,common dynamic process,European Union |
| JEL: | C26 F43 O47 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:189&r=gro |
| By: | Mohamed Arouri; Gazi Salah Uddin; Phouphet Kyophilavong; Frédéric Teulon; Aviral Kumar Tiwari |
| Abstract: | This paper contributes to literature by investigating the relationship between energy utilization and output per capita in France using asymmetric causality test over the period 1960-2011. Our approach is based on bootstrap simulation method combined with leveraged corrections that provide accurate critical values. We show that energy utilization explains output per capita over the long-run, but that the relationship between the two variables is rather asymmetric. |
| Keywords: | Energy Utilization, Income, Asymmetric Causality Test, France |
| Date: | 2014–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-102&r=gro |
| By: | Gianluigi Pelloni (Rimini Centre for Economic Analysis, Italy; Wilfrid Laurier University, Canada; Johns Hopkins Bologna Centre, Italy); Marco Savioli (Rimini Centre for Economic Analysis, Italy; University of Bologna, Italy) |
| Abstract: | In this paper we present the current crisis of the Italian economy as a phase of a major systemic decline. The social political system has led to a framework that has violated the fundamentals of sustained economic growth. An unhealthy implicit contract between the social-political elites and the civil society has imposed a “static” view of comparative advantage. The indispensable sectoral restructuring of the economy has not taken place, leading to stagnation. Defenceless positions have often been hiding the structural problem behind the screen of Italian exceptionalism. We stress that a growth strategy, though it has to be country and context specific, it cannot violate fundamentals. We suggest that Italy must take on again, as quickly as possible, a “dynamic” view of comparative advantage. That would entail a dramatic shift in its economic-political-social structure and it would be necessarily painful at different levels. However, this is the only route Italy could follow to stay on course for sustained economic growth. |
| Keywords: | sustained growth, comparative advantage, technological progress, corruption, Italy |
| JEL: | O52 O38 O32 N14 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimpre:01_14&r=gro |