nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒05‒09
twenty-two papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. Elite education, mass education, and the transition to modern growth By Strulik, Holger; Werner, Katharina
  2. Intergenerational Educational Persistence in Europe By Alyssa Schneebaum; Bernhard Rumplmaier; Wilfried Altzinger
  3. Why don't remittances appear to affect growth ? By Clemens, Michael A.; McKenzie, David
  4. Do Institutions Matter? Estimating the Effect of Institutions on Econo- mic Performance in China By Ying Fang; Yang Zhao
  5. Searching for the Parallel Growth of Cities By Zhihong Chen; Shihe Fu; Dayong Zhang
  6. The “Curse of Resources†Revisited: A Different Story from China By Ying Fang; Li Qi; Yang Zhao
  7. Greenhouse Gas and Cyclical Growth By Lance Taylor; Duncan Foley
  8. Approximate aggregation in the neoclassical growth model with ideosyncratic shocks By Karsten Chipeniuk; Nets Hawk Katz; Todd Walker
  9. Legal Enforcement against Illegal Imitation in Developing Countries By Suzuki, Keishun
  10. Economic Growth, Local Industrial Development and Inter-Regional Spillovers from Foreign Direct Investment: Evidence from China By Puman Ouyang; Shihe Fu
  11. Resource Abundance and Economic Growth in China By Rui Fan; Ying Fang; Sung Y. Park
  12. Learning for Life: A Cross-National Analysis Comparing Education with Other Determinants of Infant Mortality. By Luigi Maria Solivetti; Alessandra Mirone
  13. A knowledge economy approach in empirical growth models for the Nordic countries By Arusha Cooray; Marcella Lucchetta; Antonio Paradiso
  14. Openness to International Trade and Economic Growth : A Cross-Country Empirical Investigation By Bulent Ulasan
  15. A Note on Endogenous Growth with Public Capital By Bhattacharyya, Chandril
  16. Sub-Saharan Africa's recent growth spurt : an analysis of the sources of growth By Cho, Yoonyoung; Tien, Bienvenue N.
  17. What Diversification of Trade Matters for Economic Growth of Developing Countries? By Fabien Rondeau; Nolwen Roudaut
  18. Public debt is always toxic to economic growth By Juhana Hukkinen; Matti Viren
  19. GDP Growth in Turkey : Inclusive or Not? By Temel Taskin
  20. Optimization issues of sectoral outputs in economic output By Yondonjamts, Batsukh; Nyamdash, Batsaikhan
  21. Labor force participation rate and economic growth: observations for Turkey By KARGI, Bilal
  22. Endogenous Comparative Advantage, Gains From Trade and Symmetry-Breaking By Arpita Chatterjee

  1. By: Strulik, Holger; Werner, Katharina
    Abstract: For most of human history there existed a well-educated and innovative elite whereas mass education, market R&D, and high growth are phenomena of the modern period. In order to explain these phenomena we propose an innovation-driven growth model for the very long run in which the individual-specific return to education is conceptualized as an compound of cognitive ability and family background. This allows us to establish a locally stable steady state at which family background determines whether an individual experiences education and a locally stable steady state at which education is determined by cognitive ability. Compulsory schooling can move society from elite education to mass education. An interaction between education and life expectancy explains why the education period gets longer with ongoing economic development. Embedding this household behavior into a macro-economy we can explain different paths to modern growth: According to the Prussian way, compulsory education is implemented first and triggers later on the onset of market R&D and modern growth. According to the British way, market R&D and the take off to growth is initiated without mass education, which is triggered later by technical progress and economic development. --
    Keywords: long-run growth,elite education,compulsory education,longevity,R&D
    JEL: I24 J24 O30 O40
    Date: 2014
  2. By: Alyssa Schneebaum (Department of Economics, Vienna University of Economics and Business); Bernhard Rumplmaier (Department of Economics, Vienna University of Economics and Business); Wilfried Altzinger (Department of Economics, Vienna University of Economics and Business)
    Abstract: Primarily using data from the 2010 European Social Survey, we analyze intergenerational educational persistence in 20 European countries, studying cross-country and cross-cluster differences in intergenerational mobility; the role of gender in determining educational persistence across generations; and changes in the degree of intergenerational persistence over time. We find that persistence is highest in the Southern and Eastern European countries, and lowest in the Nordic countries. While intergenerational persistence in the Nordic and Southern countries has declined over time, it has remained relatively steady in the rest of Europe. Further, we find evidence of differences in intergenerational persistence by gender, with mothers’ education being a stronger determinant of daughters’ (instead of sons’) education and fathers’ education a stronger determinant of the education of their sons. Finally we see that for most clusters differences over time are largely driven by increasing mobility for younger women.
    Keywords: Intergenerational Persistence, Educational Attainment, Educational Welfare States, Europe, Gender
    JEL: J62 I24 I38 D63
    Date: 2014–05
  3. By: Clemens, Michael A.; McKenzie, David
    Abstract: Although measured remittances by migrant workers have soared in recent years, macroeconomic studies have difficulty detecting their effect on economic growth. This paper reviews existing explanations for this puzzle and proposes three new ones. First, it offers evidence that a large majority of the recent rise in measured remittances may be illusory -- arising from changes in measurement, not changes in real financial flows. Second, it shows that even if these increases were correctly measured, cross-country regressions would have too little power to detect their effects on growth. Third, it points out that the greatest driver of rising remittances is rising migration, which has an opportunity cost to economic product at the origin. Net of that cost, there is little reason to expect large growth effects of remittances in the origin economy. Migration and remittances clearly have first-order effects on poverty at the origin, on the welfare of migrants and their families, and on global gross domestic product; but detecting their effects on growth of the origin economy is likely to remain elusive.
    Keywords: Population Policies,Remittances,Debt Markets,Access to Finance,Currencies and Exchange Rates
    Date: 2014–05–01
  4. By: Ying Fang; Yang Zhao
    Abstract: This paper estimates the effect of institutions on economic performance using cross-city data from China. We argue that China’s ongoing reforms are part of a long and circuitous historical transition from antiquity to modernity, which started about 150 years ago. Learning from Western countries has been a central aspect of this historical process. The West had a large influence on the early stage of this transition, which has persisted to current reforms. This study uses the enrollment in Christian missionary lower primary schools in China in 1919 as an instrument for present institutions. Employing a two-stage least squares method, we find that the effect of institutions on economic performance in China is positive and significant. The results are robust according to various tests including additional controls, such as geographic factors and government policy-related variables.
    Keywords: Institutions, Christian, Geography, Policy!#O11, O53, P16, P51
    Date: 2013–10–14
  5. By: Zhihong Chen; Shihe Fu; Dayong Zhang
    Abstract: Based on the parallel growth implications of the four urban growth theories (endogenous growth theory, random growth theory, hybrid growth theory, and locational fundamentals theory), this paper uses the Chinese city size data from 1984-2006 and time series econometric techniques to test for parallel growth. The results from various types of stationarity tests show that city growth is generally random. Conditioning on growth trend and structural change, certain groups of cities with common location specific characteristics, such as similar natural resource endowment or policy regime, grow parallel in the long run, suggesting that locational fundamentals may have persistent impacts on city growth.
    Keywords: Urban growth; Parallel growth; Zipf’s law; Locational fundamentals
    JEL: C22 R11 R12
    Date: 2013–10–14
  6. By: Ying Fang; Li Qi; Yang Zhao
    Abstract: Whether natural resources boost or deter economic development remains an open question in the literature. Papyrakis and Gerlagh (2007) found a significant negative association between economic growth and resource abundance at a U.S.-state level. They demonstrated that resource abundance crowds out human capital accumulation and R&D investment. This paper performs an empirical analysis on data from 95 cities in China from 1997 to 2005 and finds no obvious evidence of a significant relationship between natural resources and economic development at the city level. By controlling province dummy variables, however, it becomes clear that resource abundance in one city imposes a significant positive “spill-over†effect on the other cities within the same province. Moreover, an analysis on transmission channels of such spill-over effects reveals that resource abundance boosts the manufacturing industry in the other cities, which is consistent with the “big push†theory.
    Keywords: Curse of resources; Spill-over effects; Big push
    JEL: O13 O18
    Date: 2013–10–14
  7. By: Lance Taylor; Duncan Foley
    Abstract: A growth model incorporating dynamics of capital per capita, atmospheric CO2 concentration, and labor and energy productivity is described. In the “medium run” output and employment are determined by effective demand in contrast to most models of climate change. In a “long run” of several centuries the model converges to a stationary state with zero net emissions of CO2. Properties of dismal and non-dismal stationary states are explored, with a latter requiring a relatively high level of investment in mitigation of emissions. Without such investment under “business as usual” output dynamics are strongly cyclical in numerical simulations. There is strong output growth for about eight decades, then a climate crisis, and output crash.
    Date: 2014–02
  8. By: Karsten Chipeniuk; Nets Hawk Katz; Todd Walker
    Abstract: We provide an explicit aggregation in the neoclassical growth model with aggregate shocks and uninsurable employment risk. We show there are two restrictions on the unemployment shock for approximate aggregation to occur. First the probability of unemployment must be positive for each agent in each time period. That ensures a strong precautionary savings motive. Second, we must have like agents having similar future prospects. That is agents with similar employment status and wealth must have similar employment paths. The solution of the model must have distribution of wealth as a state variable and hence the curse of dimensionality must be confronted. We sidestep this thorny issue by introducing a Walrassian auctioneer that communicates the optimal amount of invested in every period for every outcome of the shocks to the agents.
    Date: 2014–04
  9. By: Suzuki, Keishun
    Abstract: This paper investigates the effect of seizing illegal imitations within developing countries on imitation, innovation, and economic growth. The model shows four main results. First, a higher seizure rate does not always decrease imitative activity in the South because it may encourage the infringer to commit repeated offenses. Second, the model shows a U-shaped relationship between innovation and the strengthening seizure rate. Third, numerical analysis indicates that a sufficiently high seizure rate that is larger than a critical value is required to enhance economic growth. Finally, unlike seizure, the extended model shows that a prohibition on importing Southern illegal imitations in the North necessarily lowers imitative activities.
    Keywords: Innovation, North-South, Seizing Illegal Imitation, Import Prohibition
    JEL: F13 O31 O34
    Date: 2014–04–22
  10. By: Puman Ouyang; Shihe Fu
    Abstract: In many countries inward foreign direct investment (FDI) typically concentrates in a few regions. However, there is little empirical evidence on whether spatially concentrated FDI boosts economic growth in other regions within the same country. We use a dataset that covers 96% of Chinese cities from 1996–2004 and find that “inter-regional spillovers†from FDI concentrated in China’s coastal cities have a positive and significant effect on the growth of inland cities. In addition, an inland city’s industrial development affects its absorptive capacity to gain such interregional spillovers from coastal FDI.
    Keywords: D124Foreign direct investment, Regional inequality, Inter-regional spillovers, Absorptive capacity, Growth
    JEL: F21 R12 O40 O14 O18
    Date: 2013–10–14
  11. By: Rui Fan; Ying Fang; Sung Y. Park
    Abstract: This paper revisits the resource curse phenomenon in China and differs from the previous studies in four respects: (i)City-level data isused; (ii)A spatial variable I sconstructed to estimate the diffusion effect of natural resources among cities in the same province; (iii)The impact of resource abundance on economic development is investigated not only at the city level but also at the prefectural level in China; (iv) We use a functional coefficient regression model to deal with city-specific heterogeneity and, at the same time, analyze the transmission mechanism of the resource curse phenomenon.Our empirical results show that there is no signifficant evidence to support the existence of a resource curse phenomenon inChina.On the other hand, we find that the degree of natural resource abundance in a city has a positive diffusion effect on the economic growth of neighboring cities within the same province at the city level, but not at prefectural levels. We attribute this to the urban bias policy.
    Keywords: Resource curse; Diusion effects; Transmission channels; Functional coefficient model.
    JEL: O13 O18
    Date: 2013–10–14
  12. By: Luigi Maria Solivetti (Dipartimento di Scienze Sociali ed Economiche, Sapienza University of Rome); Alessandra Mirone (Dipartimento di Scienze Sociali ed Economiche, Sapienza University of Rome)
    Abstract: Notwithstanding extensive improvements over the last decades, infant mortality (IM) still shows huge – and increasing – disparities across the world. This paper compares various paradigms (education, growth, dependency, demographic factors) used to explain this blatant inequality. The paradigm focusing on education emerges as particularly corroborated. A wide series of education indicators are considered and contrasted, vis-à-vis several measures of mortality. The main education indicators seem to have a significant impact on IM, though some of them – in particular, variables taking account of gender – are particularly momentous. The education-IM relation does not change, whatever the indicator used to measure mortality. What is more, the education-IM relation works at both low and high levels of infant mortality, and is limitedly affected by the geographical and cultural-religious context. All in all, with regards to infant/child mortality reduction, education emerges more as a ‘stand-alone’ paradigm than just as an auxiliary variable.
    Keywords: Education; Development; Infant Mortality.
    JEL: I25
    Date: 2014–04
  13. By: Arusha Cooray (University of Wollongong); Marcella Lucchetta (Ca’ Foscari Univeristy, Venice (Italy), Department of Economics); Antonio Paradiso
    Abstract: We estimate, employing a “knowledge economy” approach, the steady state growth rate for the Nordic countries. An endogenous growth framework is developed, in which total factor productivity is a function of human capital (measured by average years of education), trade openness, research and development, and investment ratio. We identify the key variables having a significant level and growth effects within this framework. We find that education plays an important role on the long-run growth rates of Sweden, Norway, and Denmark; trade openness, instead, has growth effects in Sweden, Finland, and Iceland. The investment ratio is able to explain patterns of growth only in Finland. Surprisingly, research and development has no level or growth effects in any of the Nordic countries. This may be attributable to the fact that research and development are driven by openness and education. Policy measures are identified to improve the long-run growth rates for these countries.
    Keywords: Endogenous growth models, Trade openness, human capital, investment ratio, Steady state growth rate, Nordic countries
    JEL: C22 O52 O40
    Date: 2013
  14. By: Bulent Ulasan
    Abstract: This paper examines the long-run relationship between trade open-ness and economic growth across countries over the period 1960-2000. Two strategies are followed in empirical investigation. First, we extend the augmented neo-classical growth model with an openness variable and estimate it by using a battery of openness measures suggested in the literature. We also construct three composite trade policy indexes consisting of weighted averages of tari® rates, non-tari® barriers and black market premium for foreign exchange rate. Second, we implement Bayesian model averaging technique to deal with the model uncertainty, a fundamental problem which has been plaguing the previous works on the topic. Our ¯ndings show that there is no robust link between trade openness and long-run economic growth.
    Keywords: Economic Growth, Trade Openness, Cross-Country Growth Regression, Model Uncertainty, Bayesian Model Averaging
    JEL: F43 O47 C11 C21 C52
    Date: 2014
  15. By: Bhattacharyya, Chandril
    Abstract: This paper develops a two sector model of endogenous economic growth with public capital where private goods and public investment goods are produced with different production technologies. The government buys public investment goods produced by private producers; and the government is a monopsonist in this market. We analyse properties of growth rate maximizing and welfare maximising fiscal policies in the steady state equilibrium. It is shown that the government cannot (can) control the production of public investment good changing the income tax rate (price of public investment good). The growth rate maximizing price of the public investment good is not necessarily equal to its competitive price. However, growth rate maximising income tax rate is equal to the elasticity of private good’s output with respect to public capital but is independent of technology in public good production. Welfare maximising solution is not necessarily identical to the growth rate maximising solution even in the steady state equilibrium.
    Keywords: Income taxation; Price of public good; Endogenous growth; Steady-state equilibrium; Public capital
    JEL: H21 H41 O41
    Date: 2014–05–05
  16. By: Cho, Yoonyoung; Tien, Bienvenue N.
    Abstract: Since the mid-1990s, Sub-Saharan Africa has experienced unprecedented levels of high economic growth. A key question follows: What accounts for the turnaround of the growth performance in the mid-1990s? The answer can provide insight into whether the recent growth spurt in Sub-Saharan Africa is merely temporary or the beginning of a sustainable takeoff. This paper examines the sources of growth of 32 countries in Sub-Saharan Africa in a growth accounting framework. The findings suggest that the recent growth spurt is largely associated with an increase in the share of working-age population, capital accumulation, and total factor productivity, unlike previous periods. Resources play a role by attracting capital inflows, particularly from foreign direct investment and shifting labor away from agriculture. However, the growth prospects for Sub-Saharan Africa seem promising beyond resources, with steady progress in decreased fertility, increased foreign direct investment, political stability, and structural transformation.
    Keywords: Economic Growth,Achieving Shared Growth,Economic Theory&Research,Emerging Markets,Population Policies
    Date: 2014–05–02
  17. By: Fabien Rondeau (CREM UMR CNRS 6211, University of Rennes 1, France); Nolwen Roudaut (IREA, University of South Britanny, France)
    Abstract: This paper underlines the influence of trade diversification on GDP per capita growth. Using methodologies developed by Brenton and Newfarmer (2007) and Amurgo-Pacheco and Pierola (2008), we breakdown exports of 64 developing countries into intensive margin (old traded flows), extensive margin by new partners (geographic diversification) and extensive margin by new products (product diversification). Estimations of the augmented Solow model by system-GMM for the period 1990-2009, first confirm that trade diversification has a positive e↵ect on growth. However, this positive e↵ect of diversification tends to decrease with the level of GDP per capita. Finally, the e↵ect of product diversification is twice as large as the e↵ect of geographic diversification: to implement economic growth, developing countries should extend exports of new products rather than exports to new partners.
    Keywords: Trade, Diversification, Growth, Extensive Margin
    JEL: F14 F43 O11
    Date: 2014–04
  18. By: Juhana Hukkinen (Bank of Finland); Matti Viren (Bank of Finland and Department of Economics, University of Turku)
    Abstract: This paper deals with the debt-growth relationship using several time-series tools. The idea is to find out whether the inverse relationship between these variable can be detected without imposing any functional forms for the estimating relationship and whether the relationship does indeed reflect some nonlinear features. Thus recursive correlations with different orderings of the time-series are computed using the Reinhart & Rogoff panel data. After that, recursive correlations are re-estimated with data that are cyclically adjusted to reflect the structural features of these two variables. The nature of the relationship is also scrutinized by using various variable-parameter estimation techniques (Kalman Filter, Logistic functional form and recursive estimation). Finally, some analyses of causality are carried out using these (filtered) data. The analysis clearly shows that the inverse relationship is very robust indeed and it rather supports the “toxic debt” hypothesis than the cyclical debt accumulation hypothesis.
    Keywords: debt, government deficit, growth, causality
    JEL: E60 E62 E65
    Date: 2013–12
  19. By: Temel Taskin
    Abstract: In this paper, we discover the inclusiveness of GDP growth in Turkey over the course of the last decade. In doing so, we use a recently developed method a la Anand et al. (2013) which integrates efficiency and equity dimensions of economic growth in a single measure. We find that Turkish GDP growth was - on average - inclusive between 2002 and 2011. We also investigate cross-region and over-time developments for the available data period, and document significant heterogeneity in inclusiveness of economic growth across these dimensions. Moreover, the regional analysis based on 2006-2011 period reflects an efficiency-equity tradeoff in Turkey’s economic growth.
    Keywords: Turkey, inclusive growth, regional growth, income distribution, per capita income
    JEL: D63 O47 R11
    Date: 2014
  20. By: Yondonjamts, Batsukh; Nyamdash, Batsaikhan
    Abstract: The traditional methodology uses the real GDP growth as a proxy for the economic growth. Unfortunately this way of calculating economic growth is not taking into account of the sector inequality in the economy (especially in the economy with high degree of natural resource dependency). Therefore, this paper proposes the new approach to optimize the share of sector outputs in the economy which take into account of the inequality.
    Keywords: economic output, elasticity, sector output
    JEL: E40 E47 O1 O11 O2 O21
    Date: 2014–04–30
  21. By: KARGI, Bilal
    Abstract: Although some discussions about the relation between population and the economic growth are made for a long time, today there is a general opinion that the population growth has positive relation with the economic growth. This opinion is also supported by the empirical studies. Despite there is a growth directly advancing with the population growth, the advancing of the population in the opposite direction with the rate of the labor force participation is thought to be a paradox. This paradox reveals some concepts, namely, "jobless growth" and " unskilled growth". In this study, an explanation is sought about the remaining or less increasing of the rate of the labor force participation although a linear relation between the GDP and the population and the labor. The official statements refer that this paradox is related with the lack of female participation in the labor force and employment in the agricultural sector to be falling. This study tries to point that this quantity cannot create a quality although the growth is quantitative.
    Keywords: Economic Growth, Labor Force Participation Rate, Labor Markets, Turkey Economy.
    JEL: J01 O40
    Date: 2014–04
  22. By: Arpita Chatterjee (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: Similar countries often choose very di¤erent policies and specialize in very distinct industries. This paper proposes a mechanism to explain policy diversity among similar countries from an open economy perspective. I study optimal policies in a two country model when policies affect determinants of trade patterns. I show that welfare gains from trade can provide sufficient incentive for asymmetric equilibrium policies, even if the two countries have identical economic fundamentals. Any asymmetric equilibrium exhibits greater production specialization than the autarky optimum; this is the source of welfare gains. For this same reason, a more asymmetric Nash equilibrium Pareto dominates a less asymmetric one. All equilibria are asymmetric if aggregate income is sufficiently convex in policy, under suitable restrictions on technology and preferences. As an application, I consider a model where skill distribution is the determinant of trade patterns and the policy in question is education policy. When heterogeneous agents choose their skill level optimally, optimal skill function is convex in government policy. In this application, symmetry-breaking in optimal education policy requires that the education cost of agents is relatively inelastic with respect to skill.
    Keywords: Symmetry-breaking, Endogenous comparative advantage, Gains from trade, Education policy
    JEL: F11 E62
    Date: 2014–04

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