nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒04‒18
28 papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. The Economic and Demographic Transition, Mortality, and Comparative Development By Cervellati, Matteo; Sunde, Uwe
  2. Ethnic Inequality By Alesina, Alberto; Michalopoulos, Stelios; Papaioannou, Elias
  3. Long-Term Barriers to Economic Development By Spolaore, Enrico; Wacziarg, Romain
  4. National Institutions and Subnational Development in Africa By Michalopoulos, Stelios; Papaioannou, Elias
  5. War and Relatedness By Spolaore, Enrico; Wacziarg, Romain
  6. African economic growth in a European mirror: a historical perspective By Stephen Broadberry; Leigh Gardner
  7. Twentieth Century Growth By Crafts, Nicholas; O’Rourke Hjortshøj, Kevin
  8. Cross-sectional growth in US cities from 1990 to 2000 By Rafael González-Val
  9. Gibrat’s Law and the British Industrial Revolution By Klein, Alexander; Leunig, Tim
  10. Productivity and the Welfare of Nations By Basu, Susanto; Pascali, Luigi; Schiantarelli, Fabio; Serven, Luis
  12. Economic Freedom in the Long Run: Evidence from OECD Countries (1850-2007) By Leandro Prados de la Escosura
  13. Critical Junctures: Independence Movements and Democracy in Africa By Wantchekon, Leonard; Garcia-Ponce, Omar
  14. Discovering Chinese Economic History from Footnotes: the Living Tale of a Private Merchant Archive (1800-1850) By Ma, Debin; Yuan, Weipeng
  15. “Interrelation among Economic Growth, Income Inequality, and Fiscal Performance: Evidence from Anglo-Saxon Countries” By Karen Davtyan
  16. Financial development, financialisation and economic growth By Malcolm Sawyer
  17. Economic Growth and the Politics of Intergenerational Redistribution By Tetsuo Ono
  18. Religion, Growth and Innovation in Contemporary Russia By Jens K. Perret
  19. Beyond the R&D effects on innovation: the contribution of non-R&D activities to TFP growth in the EU By Jesus Lopez-Rodriguez; Diego Martinez
  20. Growth, Structural Change, and Poverty Reduction: Evidence from India By Sen Gupta, Abhijit; Hasan, Rana; Lamba, Sneha
  21. Inequality and development: the role of opportunities and free-will By Gustavo A. Marrero; Juan G. Rodriguez
  22. Capital Labor Substitution, Structural Change, and the Labor Income Share By Francisco Alvarez-Cuadrado; Ngo Van Long; Markus Poschke
  23. The motorcycle Kuznets curve By Shuhei Nishitateno; Paul J. Burke
  24. Income Growth, Inequality and Poverty Reduction: A Case Study of Eight Provinces in China By Xiao Luo; Chor-Ching Goh; Nong Zhu
  25. Institution Building and Political Economy By Majumdar, Sumon; Mukand, Sharun W
  26. Distance, production, trade and growth: A note By Mandal, Biswajit
  27. Economic Growth and Wage Stagnation in Perú: 1998-2012 By Peter Paz; Carlos Urrutia
  28. Does Corruption Promote Emigration? An Empirical Examination By Cooray, Arusha; Schneider, Friedrich

  1. By: Cervellati, Matteo (University of Bologna); Sunde, Uwe (University of Munich)
    Abstract: We propose a unified growth theory to investigate the mechanics generating the economic and demographic transition, and the role of mortality differences for comparative development. The framework can replicate the quantitative pat- terns in historical time series data and in contemporaneous cross-country panel data, including the bi-modal distribution of the endogenous variables across coun- tries. The results suggest that differences in extrinsic mortality might explain a substantial part of the observed differences in the timing of the take-off across countries and the worldwide density distribution of the main variables of interest.
    Keywords: Economic and Demographic Transition, Adult Mortality, Child Mortality, Quantitative Analysis, Unified Growth Model, Heterogeneous Human Capital, Comparative Development, Development Traps
    Date: 2013
  2. By: Alesina, Alberto (Harvard University, NBER and IGIER); Michalopoulos, Stelios (Brown University and NBER); Papaioannou, Elias (London Business School, CEPR and NBER)
    Abstract: This study explores the consequences and origins of between-ethnicity economic inequality both across and within countries. First, combining satellite images of nighttime luminosity with the historical homelands of ethnolinguistic groups we construct measures of ethnic inequality for a large sample of countries and show that the latter is strongly inversely related to comparative development. Second, differences in geographic endowments across ethnic homelands explain a sizable portion of ethnic inequality contributing to its persistence over time. Third, exploiting across-district within-African countries variation using individual-level data on ethnic identification and well-being from the Afrobarometer Surveys we find that between ethnic-group inequality is systematically linked to regional under-development. In this sample we also explore the channels linking ethnic inequality to (under) development, finding that ethnic inequality maps to political inequality, heightened perceptions of discrimination and undersupply of public goods.
    Keywords: Ethnicity, Diversity, Inequality, Development, Geography
    Date: 2013
  3. By: Spolaore, Enrico (Tufts University); Wacziarg, Romain (UCLA, NBER and CEPR)
    Abstract: What obstacles prevent the most productive technologies from spreading to less developed economies from the worlds technological frontier? In this paper, we seek to shed light on this question by quantifying the geographic and human barriers to the transmission of technologies. We argue that the intergenerational transmission of human traits, particularly culturally trans- mitted traits, has led to divergence between populations over the course of history. In turn, this divergence has introduced barriers to the di¤usion of technologies across societies. We provide measures of historical and genealogical distances between populations, and document how such distances, relative to the worlds technological frontier, act as barriers to the di¤usion of devel- opment and of speci…c innovations. We provide an interpretation of these results in the context of an emerging literature seeking to understand variation in economic development as the result of factors rooted deep in history.
    Keywords: Long-run growth, genetic distance, intergenerational transmission, di¤usion of innovations.
    Date: 2013
  4. By: Michalopoulos, Stelios (Brown University and NBER); Papaioannou, Elias (London Business School, NBER and CEPR)
    Abstract: We investigate the role of national institutions on subnational African development in a novel framework that accounts both for local geography and cultural-genetic traits. We exploit the fact that the political boundaries in the eve of African independence partitioned more than two hundred ethnic groups across adjacent countries subjecting similar cultures, residing in homogeneous geographic areas, to different formal institutions. Using both a matching-type and a spatial regression discontinuity approach we show that differences in countrywide institutional structures across the national border do not explain within-ethnicity differences in economic performance, as captured by satellite images of light density. The average non-effect of national institutions on ethnic development masks considerable heterogeneity partially driven by the diminishing role of national institutions in areas further from the capital cities.
    Keywords: Africa, Borders, Ethnicities, Development, National Institutions, Regression Discontinuity
    Date: 2013
  5. By: Spolaore, Enrico (Tufts University); Wacziarg, Romain (UCLA Anderson School of Management)
    Abstract: We examine the empirical relationship between the occurrence of inter-state conflicts and the degree of relatedness between countries, measured by genetic distance. We find that populations that are genetically closer are more prone to go to war with each other, even after controlling for numerous measures of geographic distance and other factors that affect conflict, including measures of trade and democracy. These findings are consistent with a framework in which conflict over rival and excludable goods (such as territory and resources) is more likely among populations that share more similar preferences, and inherit such preferences with variation from their ancestors.
    Keywords: conflicts
    Date: 2013
  6. By: Stephen Broadberry; Leigh Gardner
    Abstract: New research on historical national accounting has provided a more comprehensive picture of European economic performance from the medieval period through industrialization and the transition to modern economic growth. These data confirm anecdotal arguments that pre-industrial economies were not stagnant but rather experienced periods of growth followed by reversals which erased gains in living standards. They also provide a framework for comparing the absolute level of economic development in different times and places, using a common unit of account. These data are used here to re-assess the economic performance of African economies during the twentieth century. While African economies have been growing rapidly in recent decades, levels of per capita income remain low and this growth has not always been accompanied by the institutional and structural change witnessed in Europe during the transition to modern economic growth. As a result, growth reversals continue to pose a serious threat to African prosperity, and measures of structural change and institutional quality should be given more weight in assessing the extent to which individual countries have moved closer to achieving sustained economic growth.
    Keywords: growth; structural change; institutions; Africa; Europe
    JEL: N0
    Date: 2014–04
  7. By: Crafts, Nicholas (University of Warwick); O’Rourke Hjortshøj, Kevin (All Souls College, Oxford)
    Abstract: This paper surveys the experience of economic growth in the 20th century with a focus on technological change at the frontier together with issues related to success and failure in catch-up growth. A detailed account of growth performance based on historical national accounts data is given and is accompanied by a review of growth accounting evidence on the sources of economic growth. The key features of our analysis of divergence in growth outcomes are an emphasis on the importance of ‘directed’ technical change, of institutional quality, and of geography. We provide brief case studies of the experience of individual countries to illustrate these points.
    Keywords: catch-up growth; divergence; growth accounting; technical change
    Date: 2013
  8. By: Rafael González-Val (Universidad de Zaragoza & IEB)
    Abstract: This paper analyses the growth of American cities, understood as the growth of the population or of the per capita income, from 1990 to 2000. This empirical analysis uses data from all the cities (incorporated places) with more than 25,000 inhabitants in the year 2000 (1152 cities). The results show that while common convergence behaviour is observed in both population and per capita income growth, there are differences in the evolution of the distributions: the population distribution remains almost unchanged, while the per capita income distribution makes a great movement to the right. We use two different methodologies to test cross-sectional convergence across cities: linear growth models (allowing for spatial spillovers between locations) and spatial quantile regressions. We find evidence of significant spatial effects and non-linear behaviour.
    Keywords: City growth, linear model, spatial lag model, spatial error model, spatial quantile regression
    JEL: R00 R11 R12
    Date: 2014
  9. By: Klein, Alexander (University of Kent); Leunig, Tim (London School of Economics)
    Abstract: This paper examines Gibrat’s law in England and Wales between 1801 and 1911using a unique data set covering the entire settlement size distribution.We find that Gibrat’s law broadly holds even in the face of population doubling every fifty years,an industrial and transportrevolution, and the absence of zoning laws to constrain growth. The result is strongest for the later period, and in counties most affected by the industrial revolution. The exception were villages in areas bypassed by the industrial revolution.We argue that agglomeration externalities balanced urban disamenities such as commuting costs and poor living conditions to ensure steady growth of many places, rather than exceptional growth of few.
    Keywords: Gibrat’s law, city-size distribution, industrial revolution
    Date: 2013
  10. By: Basu, Susanto (Boston College and NBER); Pascali, Luigi (University of Warwick); Schiantarelli, Fabio (Boston College and IZA); Serven, Luis (World Bank)
    Abstract: We show that the welfare of a countrys in…nitely-lived representative consumer is summarized, to a …rst order, by total factor productivity (TFP) and by the capital stock per capita. These variables su¢ ce to calculate welfare changes within a country, as well as welfare di¤erences across countries. The result holds regardless of the type of production technology and the degree of product market competition. It applies to open economies as well, if TFP is constructed using domestic absorption, instead of gross domestic product, as the measure of output. Welfare relevant TFP needs to be constructed with prices and quantities as perceived by consumers, not …rms. Thus, factor shares need to be calculated using after-tax wages and rental rates, and will typically sum to less than one. These results are used to calculate welfare gaps and growth rates in a sample of advanced countries with high-quality data on output, hours worked, and capital. We also present evidence for a broader sample that includes both advanced and developing countries.
    Keywords: Productivity, Welfare, TFP, Solow Residual.
    Date: 2013
  11. By: Broadberry, Stephen (London School of Economics and CAGE)
    Keywords: This paper “accounts” for the Great Divergence between Europe and Asia in two ways. In the sense of measurement: (1) the traditional view, in which the Great Divergence had late medieval origins and was already well under way during the early modern period, is confirmed (2) However, revisionists are correct to point to regional variation within both continents (3) There was a Little Divergence within Europe, with a reversal of fortunes between the North Sea Area and Mediterranean Europe. (4) There was a Little Divergence within Asia, with Japan overtaking China and India. However, Japan started at a lower level of per capita income than the North Sea Area and grew at a slower rate, so continued to fall behind until after the Meiji Restoration of 1868. Any explanation needs to be able to account for the Little Divergences within Europe and Asia as well as the Great Divergence between the two continents. The divergences arose from the differential impact of shocks hitting economies with different structural features. The structural factors include: (1) The large share of pastoral farming in agriculture which helped to put the North Sea Area on the path to high-value-added, capital-intensive, non-human-energy intensive production. (2) Late marriage in the North Sea Area, which lowered fertility and encouraged human capital formation (3) Labour supply, with an industrious revolution helping to explain the Little Divergences within both Asia and Europe (4) Institutions, with the role of the state helping to explain the success of the North Sea Area. The two key shocks were (1) The Black Death, which led to a permanent per capita income gain in the North Sea Area, but not in the rest of Eurasia (2) The new trade routes which opened up from Europe to Asia and the Americas around 1500.; Great Divergence; living standards; measurement; explanation
    Date: 2013
  12. By: Leandro Prados de la Escosura (Universidad Carlos III, London School of Economics, CEPR)
    Abstract: This paper presents historical indices for the main dimensions of economic freedom and an aggregate index for nowadays developed countries -(pre-1994) OECD, for short-. Economic liberty expanded over the last one-and-a-half centuries, reaching two thirds of its maximum possible. Its evolution has been, however, far from linear. After a substantial improvement since mid-nineteenth century, World War I brought a major setback. The post-war recovery up to 1929 was followed by a dramatic decline in the 1930s and significant progress took place during the Golden Age but fell short from the pre-World War I peak. A steady expansion since the early 1980s has resulted in the highest levels of economic liberty of the last two centuries. Each main dimension of economic freedom exhibited a distinctive trend and its contribution to the aggregate index varied over time. Nonetheless, improved property rights provided the main contribution to the long-run advancement of economic liberty.
    Keywords: Negative Freedom, Economic Liberty, OECD
    JEL: N10 O17 P10
    Date: 2014–03
  13. By: Wantchekon, Leonard (Princeton University); Garcia-Ponce, Omar (New York University)
    Abstract: We show that current levels of democracy in Africa are linked to the nature of its independence movements. Using different measures of political regimes and historical data on anti-colonial movements, we find that countries that experienced rural insurgencies tend to have autocratic regimes, while those that faced urban protests tend to have more democratic institutions. We provide evidence for causality in this relationship by using rough terrain as an instrument for rural insurgency, and by performing a sensitivity analysis. Finally, the evidence suggests that the adoption of rural insurgency perpetuated the use of violence as a form of conflict resolution.
    Keywords: Africa, Colonial History, Critical Junctures, Democracy, Modernization.
    Date: 2013
  14. By: Ma, Debin (London School of Economics); Yuan, Weipeng (Chinese Academy of Social Science, Beijing)
    Abstract: This article recounts our unique encounter –through the last seven years of our research - with the Tong Taisheng (统泰升) merchant account books in the Ninjing county of Northern China in 1800-1850. By tracing the personal history of the original owner or donor, we address a large historiographical and epistemological issue behind the current Great Divergence debate on why Industrial Revolution occurred in England but not in China. Our article showcases how the development of political ideology and academic discipline in the modern era impacts our understanding of historical statistics and realities of the early modern era, a critical issue largely neglected in the current Great Divergence debate.
    Keywords: Industrial Revolution
    Date: 2013
  15. 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
  16. By: Malcolm Sawyer (University of Leeds)
    Abstract: The paper reviews the theoretical arguments which have been advanced on the relationships between economic growth and growth of the financial sector. This is followed by a similar discussion on financial repression and financial liberalisation. Growth of the financial sector and de-regulation are considered as two important features of financialisation. The differences between bank-based and market based financial systems are briefly explored as is the question of whether the financial sector is now too large. The paper is completed by overviews of the empirical results on the relationship between growth of the financial sector and economic growth and on financial liberalisation.
    Keywords: financial development, financial liberalisation, financial repression, financialisation
    JEL: G01 G18 G20
    Date: 2014–01–20
  17. By: Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This paper presents an overlapping-generation model featuring probabilistic vot- ing over two policy issues, namely, pension and public goods. To capture the forward-looking behavior of voters, we characterize a Markov-perfect political equi- librium in which the two policy variables are conditioned on a payoff-relevant state variable, that is, capital. It is shown that (i) as the population ages, the pension- to-GDP ratio and the growth rate of capital increase, but the public goods-to-GDP ratio decreases and (ii) the pension-to-GDP and public goods-to-GDP ratios are too high and the growth rate too low from the standpoint of social welfare.
    Keywords: Economic Growth; Population Aging; Probabilistic Voting; Public Pension; Public Goods Provision
    JEL: D70 E24 H55
    Date: 2014–04
  18. By: Jens K. Perret (European Institute for International Economic Relations at the University of Wuppertal)
    Abstract: For many decades culture has been considered to have a significant impact on the productivity of people. This study observes for the Russian Federation, on the basis of the ARENA study by Sreda, the impact of the share of the most prominent religious groups on economic output as well as on regional innovativeness measured by patent grants from Rospatent. While some issues of causality remain, the analysis shows that standard deductions concerning the religions effect on growth from religious doctrines hold true for the regions oft he Russian Federation as well. The effects on regional patenting, however, are not as clear.
    Keywords: russian federation, religious values, economic growth, patenting, culture
    JEL: P24 R11
    Date: 2014–04
  19. By: Jesus Lopez-Rodriguez (European Commission, Joint Research Centre, Institute for Prospective); Diego Martinez (University Pablo Olavide)
    Abstract: A significant part of the innovation efforts carried out across very heterogeneous economies in Europe is under the form of Non-R&D innovation activities. But the traditional macro approach to the determinants of TFP does not handle this issue appropiately. This paper has proposed and estimated an augmented macro-theoretical model to the determinants of total factor productivity (TFP) by jointly considering the effects of R&D endowments and the impact of Non-R&D innovation activities on …firms´ levels of productivity. The estimation of the model for a sample of EU26 countries covering the period 2004-2008 shows that the distinction between R&D and Non-R&D endowments really matters for a number of different issues. First, the results show a sizable differential impact of these endowments on TFP growth, being the impact of R&D twice as big as the impact of Non-R&D. Second, absorptive capacity is only linked to R&D endowments. And third, the two types of endowments cannot strictly been seen as complements at least for the case of countries with high R&D intensities or high Non-R&D intensities.
    Keywords: TFP, R&D, Non-R&D expenditures, EU countries
    JEL: O0 O3 O4
    Date: 2014
  20. By: Sen Gupta, Abhijit; Hasan, Rana; Lamba, Sneha
    Abstract: We examine the relationship between growth in labor productivity and poverty reduction through the lens of changes in the structure of output and employment. Combining state-level data from India on poverty with state-level data on output and employment for 11 production sectors over 1987–2009, we find that the movement of workers from lower to higher productivity sector is an important channel through which increases in aggregate productivity translate into poverty reduction. We also find that the importance of this channel of productivity growth, termed structural change by recent literature, varies across states. Exploratory analysis reveals that indicators of financial development, business regulations that promote competition and flexible labor regulations are associated with larger reallocations of labor from lower to higher productivity sectors. Overall, our findings are consistent with the view that a better investment climate is not only good for business, it is also an important means for making growth more pro-poor in a labor abundant country.
    Keywords: Labour productivity, Structural change, Poverty reduction
    JEL: I32 J23 J62 O43
    Date: 2014–04
  21. By: Gustavo A. Marrero (Universidad de La Laguna, IUDR and CAERP); Juan G. Rodriguez (Universidad Complutense de Madrid)
    Abstract: Individual income is determined by free-will actions related to the level of effort exerted and by opportunities determined by aspects beyond the individual's control, such as family background, race, place of birth or health endowments. Taking human capital as the main engine of development, we build a general equilibrium overlapping generations model to study the effect of inequality of free-will and inequality of opportunity on real per capita income. When the process of human capital accumulation is convex, we show that inequality of opportunity has a negative and monotone impact on this degree of development, while the effect of inequality of free-will is positive. However, when human capital is accumulated according to a non-convex process, multiplicity of equilibria and poverty traps arise. For economies with a low percentage of trapped dynasties (rich), the same result as for the convex model is obtained. However, for poor economies, while the relationship between free-will inequality and development generally remains positive, that between inequality of opportunity and human capital takes on an inverted U-shape.
    Keywords: inequality of opportunity, inequality of free-will, human capital accumulation.
    JEL: D63 E24 O15 O40
    Date: 2014–03
  22. By: Francisco Alvarez-Cuadrado; Ngo Van Long; Markus Poschke
    Abstract: Long run economic growth goes along with structural change. Recent work has identified explanatory factors on the demand side (non-homothetic preferences) and on the supply-side, in particular differential productivity growth across sectors and differences in factor proportions and capital deepening. This paper documents that there have also been differential trends in labor and capital income shares across sectors in the U.S., and in a broad set of other industrialized economies, and shows that a model where the degree of capital-labor substitutability differs across sectors is consistent with these trends. The interplay of differences in productivity growth and in the substitution elasticity across sectors drives both the evolution of sectoral factor income shares and the shape of structural change. We evaluate the empirical importance of this mechanism and the other mechanisms proposed in the literature in the context of the recent U.S. experience. We find that differences in productivity growth rates between manufacturing and services have been the most important driver of structural change. Yet, differences in substitution elasticities are key not only for understanding the evolution of sectoral and aggregate factor income shares, but also for the shape of structural change. Differences in capital intensity and non-homothetic preferences have hardly mattered for the manufacturing-services transition. La croissance économique de long terme entraine un changement structurel. Des travaux récents ont identifié des facteurs explicatifs du côté de la demande (préférence non homothétique) et sur le côté de l’offre, les taux de croissance inégaux de la productivité des secteurs, les différences dans les proportions de facteurs et l’approfondissement du capital. Ce papier montre qu’il y a des tendances différentielles des parts d'emploi et les revenus du capital parmi les secteurs, et montre qu’un modèle où le degré de substituabilité capital-travail diffère entre les secteurs est conforme avec ces tendances. L’interaction des différences dans la croissance de la productivité et de l’élasticité de substitution entre les secteurs entraîne à la fois l’évolution des partages sectoriels de revenus des facteurs et la forme de changement structurel. Nous évaluons l’importance empirique de ce mécanisme et les autres mécanismes proposés dans la littérature dans le contexte de l’expérience américaine récente. Nous constatons que les différences de taux de croissance de la productivité entre les secteurs ont été le facteur le plus important de changement structurel, les différences dans les élasticités de substitution sont essentielles non seulement pour comprendre l’évolution des parts de revenus des facteurs sectoriels et globaux, mais aussi pour la forme de changement structurel.
    Keywords: Structural changes; Elasticity of Substitution, Changement structurelle; l’élasticité de substitution
    Date: 2014–01–01
  23. By: Shuhei Nishitateno; Paul J. Burke
    Abstract: The evolution of motorcycle ownership is a crucial issue for road safety, as motorcyclists are highly vulnerable road users. Analyzing a panel of 153 countries for the period 1963-2010, we document a motorcycle Kuznets curve which sees motorcycle dependence increase and then decrease as economies develop. Upswings in motorcycle ownership are particularly pronounced in densely populated countries. We also present macro-level evidence on the additional road fatalities associated with motorcycles. Our results indicate that many low-income countries face the prospect of an increasing number of motorcycle-related deaths over coming years unless adequate safety initiatives are implemented.
    Keywords: motorcycles, economic development, Kuznets curve, road safety, road fatalities
    JEL: R41 O18 Q43
    Date: 2014
  24. By: Xiao Luo; Chor-Ching Goh; Nong Zhu
    Abstract: This paper examines the growth performance and income inequality in eight Chinese provinces during the period of 1989-2004 using the China Health and Nutrition Survey data. It shows that income grew for all segments of the population, and as a result, poverty incidence has fallen. However, income growth has been uneven, most rapidly in coastal areas, and among the educated. A decomposition analysis based on household income determination suggests that income growth can largely be attributed to the increase in returns to education and to the shift of employment into secondary and tertiary sector.
    Keywords: Income growth, Inequality, Poverty, China,
    JEL: O15 O53 P36
    Date: 2014–01–01
  25. By: Majumdar, Sumon (Queens University); Mukand, Sharun W (University of Warwick)
    Abstract: The paper examines the role of policy intervention in engendering institutional change. We show that first order changes in the political structure (e.g. introduction of democracy) may be undermined by local political interests and result in persistence in institutions and the (poor) quality of governance. The paper identifies two effects of development policy as a tool for institutional change. One, by increasing political accountability, it may encourage nascent democratic governments to invest in good institutions – the incentive effect. However, we show that it also increases the incentive of the rentier elite to tighten their grip on political institutions – the political control effect. Which of these dominate determine the overall impact on institutional quality. Under some conditions, by getting the elite to align their economic interests with that of the majority, development policy can lead to democratic consolidation and economic improvement. However if elite entrenchment is pervasive, then comprehensive change may require more coercive means.
    Keywords: political structure
    Date: 2013
  26. By: Mandal, Biswajit
    Abstract: This short note tries to argue that distance is not necessarily harmful for trade. It is shown that there may be an increase in the production and volume of trade if time zones of the trading nations are non-overlapping. This implies a positive effect of distance on the volume of trade. It is also shown that exploitation of time zone difference raises welfare and ensures capital accumulation. The note builds on the emerging literature on time zones and pure theory of international trade. --
    Keywords: trade,time zone
    JEL: F1
    Date: 2014
  27. By: Peter Paz (Centro de Investigación Económica, ITAM.); Carlos Urrutia (Centro de Investigación Económica, ITAM.)
    Abstract: In the last two decades, the Peruvian economy exhibited rapid growth. Moreover, the composition of the labor force improved in terms of education and experience, two variables which are typically associated to higher human capital. The average worker in 2012 had a higher level of education and was one and a half years older than in 1998, reflecting the impact of the demographic transition. However, the average real wage was roughly constant. We show that a decline in the wage premium for education, and to a minor extent for experience, is responsible for the lack of growth in the average real wage. Had these two premia remained constant throughout the period of analysis, average labor earnings would have increased by about 2.6 percent per year, of which 0.7 percentage points are accounted for the changes in the composition of the labor force in terms of age and education. We explore the role of the relative supply of workers with different levels of human capital as an explanation for the decline in the wage premium for education. Finally, we analyze the implications of these findings for some macroeconomic variables, as earnings and wage inequality, the labor share and total factor productivity. JEL Classification-JEL: I24, J21, J24, J31, O47
    Keywords: education, economic growth, human capital, labor productivity, wages
    Date: 2014
  28. By: Cooray, Arusha (University of Wollongong); Schneider, Friedrich (University of Linz)
    Abstract: This paper empirically investigates the relationship between corruption and the emigration of those with high, medium and low levels of educational attainment. The empirical results indicate that as corruption increases the emigration rate of those with high levels of educational attainment also increases. The emigration rate of those with middle and low levels of educational attainment, however, increases at initial levels of corruption and then decreases beyond a certain point. Splitting the sample by income inequality suggests that increased inequality reduces the ability to emigrate. The policy conclusion is, that government actions should focus on controlling corruption, which in turn would lead to funds being channeled more productively into education and also lead to a fall in inequality which would reduce emigration.
    Keywords: corruption, emigration, educational attainment, government expenditures, income inequality, labor markets
    JEL: O17 O5 D78 H2 H11 H26
    Date: 2014–04

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