nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒03‒30
seventeen papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. Democracy Does Cause Growth By Daron Acemoglu; Suresh Naidu; Pascual Restrepo; James A. Robinson
  2. The Wages of Women in England, 1260-1850 By Jane Humphries; Jacob Weisdorf
  3. The effect of the Spanish Reconquest on Iberian cities By David Cuberes; Rafael González-Val
  4. Medium-term Fluctuations and the "Great Ratios" of Economic Growth By Christian Groth; Jakob B. Madsen
  5. Economic Growth in Developing Countries: Is Landlockedness Destiny? By Ramesh Chandra Paudel
  6. Growing through cities in developing countries By Duranton, Gilles
  7. Why don't poor countries do R&D ? By Goni, Edwin; Maloney, William F.
  8. Growth, unemployment and wage inertia By Xavier Raurich; Valeri Sorolla
  9. Remedy of Poverty By durongkaveroj, wannaphong
  10. Sports and Regional Growth in Sweden - Is a successful professional sports team good for regional economic growth? By Värja, Emelie
  11. Directed Technical Change and Capital Deepening: A Reconsideration of Kaldor’s Technical Progress Function By Schlicht, Ekkehart
  12. Evaluating Alternatives to GDP as Measures of Social Welfare/Progress By Jeroen van den Bergh; Miklós Antal
  13. Nuclear energy, renewable energy, and economic growth in developed and developing countries : A modelling analysis from simultaneous-equation models By Anis Omri; Anissa Chaibi
  14. Aid and Economic Growth: A Robust Approach By Kwabena Gyimah-Brempong; Jeffrey S. Racine
  15. A Note on Oil and Gas Production from Shale and Long-Run U.S. Economic Growth By Arora, Vipin
  16. Trade Structure and Growth Effects of Taxation in a Two-Country World By Daisuke Amano; Jun-ichi Itaya; Kazuo Mino
  17. Production and consumption-based approaches for the Environmental Kuznets Curve in Latin America using Ecological Footprint By Marie-Sophie Hervieux; Olivier Darné

  1. By: Daron Acemoglu; Suresh Naidu; Pascual Restrepo; James A. Robinson
    Abstract: We provide evidence that democracy has a significant and robust positive effect on GDP. Our empirical strategy relies on a dichotomous measure of democracy coded from several sources to reduce measurement error and controls for country fixed effects and the rich dynamics of GDP, which otherwise confound the effect of democracy on economic growth. Our baseline results use a linear model for GDP dynamics estimated using either a standard within estimator or various different Generalized Method of Moments estimators, and show that democratizations increase GDP per capita by about 20% in the long run. These results are confirmed when we use a semiparametric propensity score matching estimator to control for GDP dynamics. We also obtain similar results using regional waves of democratizations and reversals to instrument for country democracy. Our results suggest that democracy increases future GDP by encouraging investment, increasing schooling, inducing economic reforms, improving public good provision, and reducing social unrest. We find little support for the view that democracy is a constraint on economic growth for less developed economies.
    JEL: O10 P16
    Date: 2014–03
  2. By: Jane Humphries (University of Oxford); Jacob Weisdorf (University of Southern Denmark, CEPR)
    Abstract: This paper presents a wage series for unskilled English women workers from 1260 to 1850 and compares it with existing evidence for men. Our series cast light on long run trends in women’s agency and wellbeing, revealing an intractable, indeed widening gap between women and men’s remuneration in the centuries following the Black Death. This informs several recent debates: first whether or not “the golden age of the English peasantry” included women; and second whether or not industrialization provided women with greater opportunities. Our contributions to both debates have implications for analyses of growth and trends in wellbeing. If the rise in wages that followed the Black Death enticed female servants to delay marriage, it contributed to the formation of the European Marriage Pattern, a demographic regime which positioned England on a path to modern economic growth. If the industrial revolution provided women with improved economic options, their gains should be included in any overall assessment of trends in the standard of living distorts the overall evaluation of the gains from industrialization.
    Keywords: Black Death; England; gender wage gap; industrial revolution; gender segregation, wages; women.
    JEL: J3 J4 J5 J6 J7 J8 N33
    Date: 2014–03–22
  3. By: David Cuberes (University of Sheffield); Rafael González-Val (Universidad de Zaragoza & IEB)
    Abstract: This paper studies the effect of the Spanish Reconquest, a military campaign that aimed to expel the Muslims from the Iberian Peninsula, on the population of its most important cities. The almost four centuries of Reconquest offer a “quasi-natural” experiment to study the persistence of population shocks at the city level. Analyzing city growth before and after the onset of the Reconquest, we find that it had a significant negative effect on the population of the main Iberian cities. However, when we control for time effects, we conclude that in most cities this effect was transitory. In order to quantify the duration of the shock driven by the Reconquest we then estimate its average effect on the urban share of these cities considering the time dimension of the entire panel of cities simultaneously and adding city-specific time trends. Our estimates suggest that these cities regained their pre-Reconquest shares on average in less than 100 years. These results are robust to controlling for a large set of country and city-specific socioeconomic indicators and spatial effects. Our findings suggest that the locational fundamentals that determined the relative size of Iberian cities before the Reconquest were more important determinants of the fate of these cities than the direct negative impact that the Reconquest had on their population.
    Keywords: Urban primacy, locational fundamentals, city growth, lock-in effects
    JEL: R12 N9
    Date: 2014
  4. By: Christian Groth (Department of Economics, Copenhagen University); Jakob B. Madsen (Department of Economics, Monash University)
    Abstract: Evidence for the OECD countries show that the “great ratios”, such as the unemployment rate, factor shares, Tobin’s q and the investment-capital ratio, fluctuate significantly on medium-term frequencies of 10-40 years duration. To explain these medium-term fluctuations, we establish a macro-dynamic model where the q-theory of investment is combined with sluggish real-wage adjustment in the labour market. In this framework, responses to shocks show persistence and amplification. A high degree of real-wage rigidity combined with a low elasticity of factor substitution leads to damped internal oscillations and hump-shaped impulse-response functions.
    Keywords: Medium-term cycles, Tobin’s q, real-wage Phillips curve, elasticity of factor substitution, endogenous oscillations
    JEL: E3 G1 O4
    Date: 2013
  5. By: Ramesh Chandra Paudel
    Abstract: This paper examines the determinants of economic growth in developing countries within the standard growth regression framework, with special attention being paid to the experience of landlocked countries. The results confirm the findings of previous studies that landlockedness hampers economic growth, but the magnitude of negative impact is sensitive to alternative estimation methods. However, the analysis suggests that good governance, trade-openness, and coordinating infrastructure development with neighbours explain the significant aspect of the inter-country differences in growth rates among landlocked developing countries (LLDCs). The results also suggest that African landlocked are not different from the other LLDCs. Contrary to the 'resource-curse' hypothesis, natural resources seem to contribute to economic growth of LLDCs.
    Keywords: Landlocked Countries, Economic Growth, Governance, Hausman-Taylor Estimation
    JEL: O50 F43 O43 C33
    Date: 2013
  6. By: Duranton, Gilles
    Abstract: This paper examines the effects of urbanization on development and growth. It begins with a labor market perspective and emphasizes the importance of agglomeration economies, both static and dynamic. It then argues that more productive jobs in cities do not exist in a void and underscores the importance of job and firm dynamics. In turn, these dynamics are shaped by the broader characteristics of urban systems. A number of conclusions are drawn. First, agglomeration effects are quantitatively important and pervasive. Second, the productive advantage of large cities is constantly eroded and must be sustained by new job creation and innovation. Third, this process of creative destruction in cities, which is fundamental for aggregate growth, is determined in part by the characteristics of urban systems and broader institutional features. The paper highlights important differences between developing countries and more advanced economies. A major challenge for developing countries is to reinforce the role of their urban systems as drivers of economic growth.
    Keywords: City Development Strategies,Transport Economics Policy&Planning,Labor Policies,National Urban Development Policies&Strategies,Urban Housing and Land Settlements
    Date: 2014–03–01
  7. By: Goni, Edwin; Maloney, William F.
    Abstract: Using a global panel on research and development (R&D) expenditures, this paper documents that on average poor countries do far less R&D than rich as a share of GDP. This is arguably counter intuitive since the gains from doing the R&D required for technological catch up are thought to be very high and griffith2004 have documented that in the OECD returns increase dramatically with distance from the frontier. Exploiting recent advances in instrumental variables in a varying coefficient context we find that the rates of return follow an inverted U: they rise with distance to the frontier and then fall thereafter, potentially turning negative for the poorest countries. The findings are consistent with the importance of factors complementary to R&D, such as education, the quality of scientific infrastructure and the overall functioning of the national innovation system, and the quality of the private sector, which become increasingly weak with distance from the frontier and the absence of which can offset the catch up effect. China's and India's explosive growth in R&D investment trajectories in spite of expected low returns may be justified by their importing the complementary factors in the form of multinational corporations who do most of the patentable research.
    Keywords: Economic Theory&Research,Debt Markets,E-Business,Political Economy,Scientific Research&Science Parks
    Date: 2014–03–01
  8. By: Xavier Raurich (Facultat d'Economia i Empresa; Universitat de Barcelona (UB)); Valeri Sorolla (Univrsitat Autònoma de Barcelona)
    Abstract: We introduce wage setting via efficiency wages in the neoclassical one-sector growth model to study the growth effects of wage inertia. We compare the dynamic equilibrium of an economy with wage inertia with the equilibrium of an economy without it. We show that wage inertia affects the long run employment rate and that the transitional dynamics of the main economic variables will be different because wages are a state variable when wage inertia is introduced. In particular, we show that the model with wage inertia can explain some growth patterns that cannot be explained when wages are flexible. We also study the growth effects of permanent technological and fiscal policy shocks in these two economies. During the transition, the growth effects of technological shocks obtained when wages exhibit inertia may be the opposite of those obtained when wages are flexible. These technological shocks may have long run effects if there is wage inertia.
    Keywords: Wage inertia, Growth, Efficiency wages, Transitional dynamics, Unemployment.
    JEL: O41
    Date: 2014
  9. By: durongkaveroj, wannaphong
    Abstract: Economic growth is typically recognized as the effective tool in eradicating of poverty. Unfortunately, many countries enjoy their national prosperity with no improvement in citizen's living standard. The purpose of this study is to investigate the new tool aimed at reducing poverty through log-linear model and to estimate the impact of exogenous macroeconomic shock occurred in every sector on poverty through SAM multiplier. The result reveals that poverty is not sensitive to economic growth changes while it is definitely elastic to economic development. Growth is no longer an effective tool. Additionally, Latin America needs to export the commodities from meat, heavy manufacturing, and textile sector to help getting people out of poverty.
    Keywords: poverty, economic growth, economic development, sam multiplier
    JEL: C68 I32 O20 O57
    Date: 2014–03–21
  10. By: Värja, Emelie (Örebro University School of Business)
    Abstract: This study investigates whether net inbound migration and per capita income growth of a municipality is affected when a local sports team enters or exits the premium national leagues in ice hockey or soccer in Sweden. Local governments frequently support a local professional team through direct subsidies; beneficial funding of arenas, etc., which often is motivated by alleged, positive externalities through effects on the attractiveness of the municipality as a leisure-travel destination, or place for living or doing business, which ultimately is supposed to enhance the tax base and the tax revenues of the local government. Previous literature on such effects is based on simple models estimated on a selected sample of cities and without consideration of spatial interdependencies between local areas. We carry out a simultaneous estimation of spatial paneldata models of income per capita growth and net migration rates using annual data from all Swedish municipalities from 1995-2011 (except for four municipalit that have changed borders). With this richer modeling framework we still find no evidence of a positive relationship from performance of a local team on any of these two variables.
    Keywords: sports; growth; spatial econometrics; regional growth
    JEL: H71 J61 L83
    Date: 2014–03–21
  11. By: Schlicht, Ekkehart
    Abstract: This note proposes a growth model that is derived from the standard Solow growth model by replacing the neoclassical production function with Kaldor’s technical progress function while maintaining a marginalist theory of factor prices in the spirit suggested by von Weizsäcker (1966, 1966b). The hybrid model so obtained accounts for balanced growth in a way that appears less arbitrary than the Solow model, especially because it directly accounts for Harrod neutral technical change, without any need for further assumptions.
    Keywords: directed technical change; directed technological change; bias in innovation; technical progress function; neoclassical production function; Harrod neutrality; Hicks neutrality; Cambridge theory of distribution; marginal productivity theory; Kaldor; Kennedy; von Weizsäcker; Solow model
    JEL: O30 O40 E12 E13 E25 B31 B59
    Date: 2014–03–17
  12. By: Jeroen van den Bergh; Miklós Antal
    Abstract: Proposed alternatives to GDP as a measure of social welfare or human progress are briefly evaluated. Four main categories are considered, namely ISEW and GPI based on corrections of GDP, sustainable or green(ed) GDP, genuine savings/investments and composite indexes. All these alternatives turn out to suffer from various shortcomings. Nevertheless, several of them represent a considerable improvement over GDP information in approximating social welfare. This gives support to the idea that we should not wait to give less importance and attention to GDP (per capita) information in public decision-making until a perfect alternative indicator is available.
    Keywords: Composite indicators; economic growth; externalities; genuine savings; green GDP; happiness; informal sector; information failure; ISEW; status goods; sustainable income
    JEL: D60 E01 O11
    Date: 2014–03
  13. By: Anis Omri; Anissa Chaibi
    Abstract: This paper investigates the causal relationship among two types of energy consumption (nuclear energy and renewable energy) and economic growth using dynamic simultaneous-equation panel data models for 17 developed and developing countries. Our results indicate that there is a unidirectional causality running from nuclear consumption to economic growth in Belgium and Spain, while a unidirectional causality running from economic growth to nuclear consumption is supported in Bulgaria, Canada, Netherlands, and Sweden. A bidirectional relationship appears in Argentina, Brazil, France, Pakistan, and the USA, while no causality exists in Finland, Hungary, India Japan, Switzerland, and the U.K. Second, the results for the second nexus among renewable energy and economic growth show that there is a unidirectional causality running from renewable consumption to economic growth in Hungary, India, Japan, Netherlands, and Sweden, while there exist a unidirectional running from economic growth to renewable consumption in Argentina, Spain, and Switzerland. A bidirectional relationship is supported in Belgium, Bulgaria, Canada, France, Pakistan, and the USA, while no causality exists in Brazil, Finland, and Switzerland . Third, we find the existence of a bidirectional causality between nuclear consumption and economic; and a unidirectional causality running from economic growth to renewable energy consumption for the global panel.
    Keywords: Nuclear energy, Renewable energy, Economic growth, Dynamic simultaneous-equation models.
    Date: 2014–02–25
  14. By: Kwabena Gyimah-Brempong; Jeffrey S. Racine
    Abstract: This paper uses panel data and the Local Linear Kernel Estimator (LLKE) to investigate the effects of aid on economic growth in developing countries. Specifically, we investigate the robustness of a popular parametric specification of the aid/economic growth relationship in Less Developed countries (LDCs). First, we find that aid has a significant impact on economic growth given the support of the sample data we use. However, the effect depends on how aid is measured. We find a positive growth eect when aid is measured as aidgni but no signicant growth effect when aid is measured as aidpercap. Second, we find some evidence of increasing returns to aidgni. Finally, we find that a "good" policy environment increases the effectiveness of aid in LDCs, all things equal. The impact of the policy environment on growth varies according to how the policy environment is measured. Our results generally support the popular quadratic parametric specification of the aid/growth relationship. Our results have implications for aid policy and for research on the effectiveness of aid.
    Keywords: aid, economic growth, investment, developing countries, robustness test, non-parametric regression, policy impacts
    JEL: F35 F43 O O1 O53 O54 O55
    Date: 2014–03
  15. By: Arora, Vipin
    Abstract: The short-term economic benefits of oil and gas production from shale for the U.S. economy have been widely discussed, but the long-term effects remain unclear. These long-run impacts likely depend upon the degree to which such oil and gas production can impact growth in capital per worker or technological progress throughout the economy. Oil or gas production from shale can lead to economic growth through economy-wide increases in capital per worker directly through investment in the oil and gas extraction sector and along the supply chain. Alternatively, the availability of low cost natural gas in large quantities may lead to replacement or additions to capital stock outside of oil and gas extraction and related industries. Oil and gas production can lead to economy-wide technology gains directly through the application of technologies used in extraction and related activities in other sectors. There is much greater upside and uncertainty, however, surrounding if such production can lead to technological growth in other sectors indirectly. Are there currently important and productive technologies not being used or applied that become plausible because of lower-cost natural gas? Will there be transformative technologies developed for use with lower-cost natural gas that currently do not exist? And might each of these individually lead to other technologies that currently do not exist?
    Keywords: Productivity; shale; economic growth; oil and gas
    JEL: E00 O40 Q33 Q43
    Date: 2014–03–24
  16. By: Daisuke Amano (Otaru University of Commerce); Jun-ichi Itaya (Hokkaido University); Kazuo Mino (Kyoto University)
    Abstract: This paper explores the long-run impacts of tax policy in a two-country model of endogenous growth with variable labor supply. We focus on international spillover effects of tax reforms under alternative trade structures. It is shown that if the instantaneous utility function of the representative family in each country is additively separable and if international capital mobility is absent, then a change in taxation in one country does not directly affect capital formation in the other country. Such a conclusion is fundamentally modified if international lending and borrowing are allowed. In the presence of financial capital mobility, a change in tax policy in one country directly diffuses to the growth performance of the other country, even though preference structures are assumed to be log-additive forms.
    Keywords: factor-income tax, consumption tax, equilibrium dynamics, two-country model, endogenous growth, variable labor supply
    JEL: F43 O41
    Date: 2014–03
  17. By: Marie-Sophie Hervieux (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); Olivier Darné (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: In this paper we examine the Environmental Kuznets Curve (EKC) hypothesis using the Ecological Footprint (EF), a more comprehensive indicator of environmental degradation, for ve Latin American countries covering the 1971-2007 period. We test the EKC hypothesis using a traditional quadratic function from both the supply and consumption-side, adding several explicative variables: urbanization, petrol price and industrialization for supply-side; biocapacity, life expectancy and energy use for consumption-side. We perform an ARDL modeling in order to study both short and long-run periods. We nd that there is no stable relationship between environment and economic development in the long-run. For the short-run analysis, the EKC hypothesis is supported for no one, we rather nd an increasing relationship between growth and environment. Results for explicative variables are mixed: For production-side approach, industrialization appears to have a positive impact on EF for Chile. For consumption-side approach, we nd that energy use seems to have a positive impact on EF for Argentina and Colombia whereas biocapacity and life expectancy have a positive and negative impact, respectively, on EF for Paraguay.
    Keywords: Environmental Kuznets Curve; Ecological Footprint; ARDL model.
    Date: 2014–03–13

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