nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒03‒22
fourteen papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. The great divergence: A network approach By Lindner, Ines; Strulik, Holger
  2. Culture: Persistence and Evolution By Francesco Giavazzi; Ivan Petkov; Fabio Schiantarelli
  3. Natural disasters and macroeconomic performance: The role of residential investment By Holger Strulik; Timo Trimborn
  4. Endogenous fertility with a sibship size effect. By Elise S. Brezis; Rodolphe Dos Santos Ferreira
  5. Growth Theories By Claude Diebolt; Faustine Perrin
  6. Demographic transitions in Europe and the world By Frans J. Willekens
  7. Corruption’s and Democracy’s effects on Economic Growth By Zaouali, Amira
  8. Female labor force participation and economic growth– re-examination of U-shaped curve By Ewa Lechman
  9. Growth or development: experience from Latin America By durongkaveroj, wannaphong
  10. Environmental Quality and Economic Growth: A Panel Analysis of the "U" in Kuznets By F. Akpan, Usenobong; E. Abang, Dominic
  11. Grooming Classifications: Exchange Rate Regimes and Growth in Transition Economies By Petreski, Marjan
  12. The laffer curve and the debt-growth link in low-income Sub-Saharan African economies By Megersa, kelbesa
  13. The Contribution of Research and Innovation to Productivity and Economic Growth By Amani Elnasri; Kevin J. Fox
  14. Be Fruitful and Multiply? Moderate Fecundity and Long-Run Reproductive Success By Galor, Oded; Klemp, Marc

  1. By: Lindner, Ines; Strulik, Holger
    Abstract: We present a multi-country theory of economic growth in which countries are connected by a network of mutual knowledge exchange. Growth is generated through human capital accumulation and knowledge externalities. The available knowledge in any country depends on its connections to the rest of the world and on the human capital of the countries it is exchanging knowledge with. We show how the diffusion of knowledge through the world explains the evolution of global income inequality. It generates a Great Divergence, that is increasing world inequality after the take-off of the forerunners of the industrial revolution, followed by a Great Convergence, that is decreasing world inequality after the take-off of the latecomers of the industrial revolution. Knowledge diffusion through a Small World network produces an extraordinary diversity of individual growth experiences of initially identical countries including differentiated take-offs to growth as well as overtaking and falling behind in the course of world development. --
    Keywords: networks,knowledge diffusion,economic growth,world income distribution
    JEL: O10 O40 D62 D85 F41
    Date: 2014
  2. By: Francesco Giavazzi (Bocconi University); Ivan Petkov (Boston College); Fabio Schiantarelli (Boston College; IZA)
    Abstract: This paper presents evidence on the speed of evolution (or lack thereof) of a wide range of values and beliefs of different generations of European immigrants to the US. The main result is that persistence differs greatly across cultural attitudes. Some, for instance deep personal religious values, some fam-ily and moral values, and political orientation are very persistent. Other, such as attitudes toward cooperation, redistribution, effort, children independence, premarital sex, and even the frequency of religious practice or the intensity of association with one’s religion, converge rather quickly. Moreover, the results obtained studying higher generation immigrants differ greatly from those obtained limiting the analysis to the second generation, and imply lesser degree of persistence. Finally, we show that persistence is ”culture specific” in the sense that the country from which one’s ancestors came matters for the pattern of generational convergence.
    Keywords: Culture, Values, Beliefs, Transmission, Persistence, Evolution, Immigrants, Integration
    JEL: A13 F22 J00 J61 Z10
    Date: 2014–03–18
  3. By: Holger Strulik; Timo Trimborn
    Abstract: Recent empirical research has shown that income per capita in the aftermath of natural disasters is not necessarily lower than before the event. Income remains in many cases not significantly affected or, perhaps even more surprisingly, it responds positively to natural disasters. Here, we propose a simple theory, based on the neoclassical growth model, that explains these observations. Specifically we show that GDP is driven above its pre-shock level when natural disasters destroy predominantly residential housing (or other durable goods). Disasters destroying mainly productive capital, in contrast, are predicted to reduce GDP. Insignificant responses of GDP can be expected when disasters destroy about twice as much residential structures as productive capital. We show that disasters, irrespective of whether their impact on GDP is positive, negative, or insignificant, entail considerable losses of aggregate welfare. --
    Keywords: natural disasters,economic recovery,residential housing,economic growth
    JEL: E20 O40 Q54 R31
    Date: 2014
  4. By: Elise S. Brezis; Rodolphe Dos Santos Ferreira
    Abstract: Since the seminal work of Becker, the dynamics of endogenous fertility has been based on the trade-off faced by parents between the quantity and the quality of their children. However, in developing countries, when child labor is an indispensable source of household income, parents actually incur a negative cost for having an extra child, so that the trade-off disappears. The purpose of this paper is to restore the Beckerian quantity-quality trade-off in the case intergenerational transfers are upstream, so as to keep fertility endogenous. We do that by adding a negative “sibship size effect” on human capital formation to the standard Becker model. With a simple specification, we obtain multiplicity of steady states or, more fundamentally, the possibility of a jump from a state with high fertility and low income to a state with low fertility and high income, triggered by a continuous increase in the productivity of human capital formation.
    Keywords: Endogenous fertility, Intergenerational transfers, Human capital formation, Demographic transition.
    JEL: E24 J13
    Date: 2014
  5. By: Claude Diebolt (BETA/CNRS (UMR7522), University of Strasbourg, France); Faustine Perrin (BETA/CNRS (UMR7522), University of Strasbourg, France)
    Date: 2014
  6. By: Frans J. Willekens (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: The demographic transition is a universal phenomenon. All regions of the world experience a change from high levels of mortality and fertility to low levels. The onset and pace of the demographic transition vary between regions and countries because of differences in timing of events and conditions that trigger the transition. As a consequence, we observe diverging trends in population growth and ageing around the world. The paper shows that transitions in mortality, fertility and migration have several features in common. Demographic transitions are intertwined with science and technology, the economy, cultural change and social and political processes. The interaction between these processes take place at the level of the individual, not at the population level. The human desire for a long and fulfilling life is the main driver of demographic change. Science and technology provide instruments to control demographic processes but the use of these instruments is conditioned by economic and cultural change. Individuals are more likely to act if they are aware that they can influence the outcome of their action, the outcome is beneficial and they have the instruments to exercise control. The pace of a transition depends on (a) diffusion processes that govern the transmission of values, preferences, norms and practices and (b) inertia in a population due to its composition. Keywords: Demographic transition, path dependence, diffusion, agency, demographic dividends
    Keywords: demographic transition
    JEL: J1 Z0
    Date: 2014–03
  7. By: Zaouali, Amira
    Abstract: Economists have a long argue that political process such as democracy and corruption are important for economic growth. Our objective in this paper is to demonstrate that one of democracy's indirect posititive effects is its ability to mitigate the negative effect of corruption on economic growth. Although most democratic countries in our sample have a high level of corruption, the electoral mechanism inhibits leaders from engaging in acts of corruption that cause damage to economic performance and thus jeopardize their political survival. Utilizing a dynamic panel data approach for more than 40 countries over the period 2000- 2011, the results show that in democratic countries, corruption has no significant effect on economic growth, while the non-democratic countries suffer the negative effects of corruption that retard economic growth.
    Keywords: Corruption, Democracy, Economic Growth, dynamic panel.
    JEL: C23 E02 O43 O47
    Date: 2014–03–18
  8. By: Ewa Lechman (Gdansk University of Technology, Gdansk, Poland)
    Abstract: The paper contributes by providing new insights into the relationship between female labor force and economic growth in 162 countries over the period 1990-2012. We anticipate uncovering U-shaped impact of economic growth on female labor force. To examine the previous we deploy longitudinal data analysis assuming non-linearity between variables. Our main findings support the hypothesis on U-shaped relationship between female labor force participation and economic growth, however high cross-country variability on the field is evident.
    Keywords: female labor force, women, economic growth, U-shaped curve, panel data
    JEL: J21 O10 O50
    Date: 2014–03
  9. By: durongkaveroj, wannaphong
    Abstract: The purposes of this study were to present the current situation of poverty, economic growth, and economic development for five selected countries in Latin America and to examine the relationship between poverty, economic growth, and economic development through traditional log-linear regression model for panel data analysis. The result from fixed effect model suggested that economic development is more effective and preferable than economic growth in eradicating of poverty. Policy issued aimed at raising citizen's living standard should shed on income, health, and education simultaneously instead of standard improvement in income level merely.
    Keywords: economic development, economic growth, poverty,
    JEL: C10 I32 O15 O20
    Date: 2014–03–15
  10. By: F. Akpan, Usenobong; E. Abang, Dominic
    Abstract: The primary motivation behind this study was to search for evidence of the link between environmental quality and economic growth so as to answer the relevant question of whether economic growth alone could serve as a long-run solution to environmental damage as implied by EKC hypothesis. Here we analyze the relationship using a panel of 47 countries over the period 1970 -2008. Using Random-effect estimation and two-stage least square, our results leads to the following conclusions: relying on a quadratic model can easily mislead researchers to ratify the existence of EKC; the EKC hypothesis ceased to hold whenever an alternative functional form (cubic) is employed. At best, the relationship between economic growth and environmental quality is shown to be typified by an N-shaped curve. The paper maintained that simply waiting for an automatic arrival of a delinking point for environmental damage given long-run growth will not be a feasible solution to environmental quality. A number of feasible policy menu and critical questions to guide selection of the best instrument capable of bringing about a downturn in environmental damage have been suggested in the paper.
    Keywords: Economic growth, EKC hypothesis, Environmental quality, delinking
    JEL: C23 C26 Q43 Q57
    Date: 2014–02–13
  11. By: Petreski, Marjan
    Abstract: The objective of this paper is to test the exchange rate regime – growth nexus in transition economies by looking if and how some inherent characteristics of the transition process might have affected the de-facto classifications of exchange rate regimes. 28 transition countries of Central and Eastern Europe and the Commonwealth of Independent States are investigated over 1991-2007 and three de facto classifications of exchange rate regimes are considered. As usual in the empirical literature, initially, the exchange rate regime effect on growth differs across classifications. However, further investigation suggests that the three classifications usually disagree around some inherent characteristics of the transition process, like the higher trade openness of the countries, the episodes of high inflation and the bank system reform and interest rate liberalization. Results indicate that high inflation likely determined disagreement in early transition, while trade openness and interest rate liberalization in late transition. After classifications have been cleaned of the disagreeing points, the final results, corrected for the potential selectivity bias, suggest that both pegs and intermediate regimes of all three classifications significantly outperform floats in terms of economic growth, the average effect being slightly lower for pegs.
    Keywords: exchange rate regime classifications; economic growth; transition economies
    JEL: E42 F31
    Date: 2014
  12. By: Megersa, kelbesa
    Abstract: The study of the link between debt and growth has been full of debates, both in theory and empirics. However, there is a growing consensus that the relationship is sensitive to the level of debt. Our paper tries to address the question of non linearity in the long term relationship between public debt and economic growth. Specifically, we set out to test if there exists an established ‘laffer curve’ type relationship, where debt contributes to economic growth up to a certain point (maximal threshold) and then starts to have a negative effect on growth afterwards. To carry out our tests, we have used a methodology that delivers a superior test of bell shapes, in addition to the traditional test based on a regression with a quadratic specification. The results show evidence of a bell-shaped relationship between economic growth and total public debt in a panel of low income Sub-Saharan African economies. This supports the hypothesis that debt has some positive contribution to economic growth in low-income countries, albeit up to a point. If debt goes on increasing beyond the level where it would be sustainable, it may start to be a drag on economic growth.
    Keywords: public debt, economic growth, laffer curve, low-income countries, Sub-Saharan Africa
    JEL: C1 C12 C14 C4 E62 G01 H5 H61 H63 H68 N17 O1 O11 O55 P52
    Date: 2014–03–12
  13. By: Amani Elnasri (School of Economics, Australian School of Business, the University of New South Wales); Kevin J. Fox (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: This paper examines the impact of investment in research and innovation on Australian market sector productivity. While previous studies have largely focused on a narrow class of private sector intangible assets as a source of productivity gains, this paper shows that there is a broad range of other business sector intangible assets that can significantly affect productivity. Moreover, the paper pays special attention to the role played by public support for research and innovation in the economy. The empirical results suggest that there are significant spillovers to productivity from public sector R&D spending on research agencies and higher education. No evidence is found for productivity spillovers from indirect public support for the business enterprise sector, civil sector or defence R&D. These findings could have implications for government innovation policy as they provide insights into possible productivity gains from government funding reallocations.
    Keywords: Productivity, Innovation, Intangible assets, Public support
    JEL: O3 O4 H4
    Date: 2014–01
  14. By: Galor, Oded (Brown University); Klemp, Marc (Brown University)
    Abstract: This research presents the first evidence that moderate fecundity was conducive for long-run reproductive success within the human species. Exploiting an extensive genealogy record for nearly half a million individuals in Quebec during the seventeenth and eighteenth centuries, the study traces the number of descendants of early inhabitants in the subsequent four generations. Using the time interval between the date of marriage and the first live birth as a measure of reproductive capacity, the research establishes that while a higher fecundity is associated with a larger number of children, an intermediate level maximizes long-run reproductive success. The finding further indicates that the optimal level of fecundity was below the population median, suggesting that the forces of natural selection favored individuals with a lower level of fecundity. The research lends credence to the hypothesis that during the Malthusian epoch, natural selection favored individuals with a larger predisposition towards child quality, contributing to the onset of the demographic transition and the evolution of societies from an epoch of stagnation to sustained economic growth.
    Keywords: demography, evolution, natural selection, fecundity, quantity-quality trade-off, long-run reproductive success
    JEL: J10 O10
    Date: 2014–03

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