nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒06‒02
forty-one papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. Landownership Concentration and the Expansion of Education By Cinnirella, Francesco; Hornung, Erik
  2. Speed under Sail, 1750-1850 By Morgan Kelly; Cormac Ó Gráda
  3. Resetting the Urban Network: 117-2012 By Michaels, Guy; Rauch, Ferdinand
  4. Human Capital and Fertility in Chinese Clans Before Modern Growth By Shiue, Carol Hua
  5. The Biogeographic Origins of Novelty-Seeking Traits By Erkan Gören
  6. Global Divergence in Growth Regressions By Battisti, Michele; Di Vaio, Gianfranco; Zeira, Joseph
  7. Primary Education and Fertility Rates in Southern Africa: Evidence from Before the Demographic Transition By Manoel Bittencourt
  8. Urbanization as opportunity By Fuller, Brandon; Romer, Paul
  9. Exogenous Volatility and the Size of Government in Developing Countries By Brückner, Markus; Gradstein, Mark
  10. Culture, Beliefs and Economic Performance By Rafael Di Tella; Robert MacCulloch
  11. Economic Freedom in the Long Run: Evidence from OECD Countries (1850-2007 By Prados de la Escosura, Leandro
  12. Was Stalin Necessary for Russia’s Economic Development? By Cheremukhin, Anton; Golosov, Mikhail; Guriev, Sergei; Tsyvinski, Aleh
  13. Technological Progress and Economic Geography By Tabuchi, Takatoshi; Thisse, Jacques-François; Zhu, Xiwei
  14. The great migration : urban aspirations By Keith, Michael
  15. Networks of Military Alliances, Wars, and International Trade By Matthew O. Jackson; Stephen M. Nei
  16. Just Add Milk: A Productivity Analysis of the Revolutionary Changes in Nineteenth Century Danish Dairying By Markus Lampe; Paul Sharp
  17. Population and technological innovation: the optimal interaction across modern countries By Mario Coccia
  18. Growth and Structural Change in a Dynamic Lagakos-Waugh Model By Huikang Ying
  19. The Brasília Experiment: Road Access and the Spatial Pattern of Long-term Local Development in Brazil By Bird, Julia; Straub, Stéphane
  20. Novelty,Hysteresis,and Growth By Mario Amendola; Jean Luc Gaffard
  21. Education and Fertility: Panel Time-Series Evidence from Southern Africa By Manoel Bittencourt
  22. Immiserizing Capital Flows to Developing Countries By Bender, Dieter; Loewenstein, Wilhelm
  23. Social Capital, Government Expenditures, and Growth By Ponzetto, Giacomo AM; Troiano, Ugo
  24. Does Economic Growth Reduce Corruption? Theory and Evidence from Vietnam By Bai, Jie; Jayachandran, Seema; Malesky, Edmund J.; Olken, Benjamin
  25. Modeling the Emissions-Income Relationship Using Long-Run Growth Rates By Zeba Anjum; Paul J. Burke; Reyer Gerlagh; David I. Stern
  26. China's Impact on Africa - the Role of Trade, FDI and Aid By Busse, Matthias; Erdogan, Ceren; Muehlen, Henning
  27. Backbone services as growth enabling factor - an Input-Output analysis for South Africa By Susanne Fricke; Bianka Dettmer
  28. Economic Growth and Political Integration: Estimating the Benefits from Membership in the European Union Using the Synthetic Counterfactuals Method By Campos, Nauro F; Coricelli, Fabrizio; Moretti, Luigi
  29. Optimal fiscal policy in the neoclassical growth model revisited By Mennuni, Alessandro; Gervais, Martin
  30. Health and Education: Another Look with the Proper Data By Cohen, Daniel; Leker, Laura
  31. Baumol’s cost disease and the sustainability of the welfare state By Andersen, Torben M; Kreiner, Claus Thustrup
  32. The Argentina Paradox: Microexplanations and Macropuzzles By Taylor, Alan M.
  33. Does Wealth Inequality Matter for Growth? The Effect of Billionaire Wealth, Income Distribution, and Poverty By Bagchi, Sutirtha; Svejnar, Jan
  34. The Link Between Fundamentals and Proximate Factors in Development By Keller, Wolfgang; Shiue, Carol Hua
  35. Public education, endogenous fertility and economic growth By Ko Shakuno
  36. Regional inequalities in the impact of broadband on productivity: Evidence from Brazil By Jung, Juan
  37. Finance and the Preservation of Wealth By Gennaioli, Nicola; Shleifer, Andrei; Vishny, Robert
  38. A Neoclassical Growth Model for the Insiders – Outsiders Society By Kollintzas, Tryphon; Papageorgiou, Dimitris; Vassilatos, Vanghelis
  39. Reduced Deforestation and Economic Growth By Patrick DoupŽ
  40. Trade in a 'Green Growth' Development Strategy: Issues and Challenges By de Melo, Jaime
  41. Capital Accumulation, Vintage and Productivity: The Japanese Experience By Taiji Hagiwara; Yoichi Matsubayashi

  1. By: Cinnirella, Francesco; Hornung, Erik
    Abstract: This paper studies the effect of landownership concentration on school enrollment for nineteenth century Prussia. Prussia is an interesting laboratory given its decentralized educational system and the presence of heterogeneous agricultural institutions. We find that landownership concentration, a proxy for the institution of serfdom, has a negative effect on schooling. This effect diminishes substantially towards the end of the century. Causality of this relationship is confirmed by introducing soil texture to identify exogenous farm-size variation. Panel estimates further rule out unobserved heterogeneity. We present several robustness checks which shed some light on possible mechanisms.
    Keywords: Education; Institutions; Land concentration; Peasants' emancipation; Prussian economic history; Serfdom
    JEL: I25 N33 O43 Q15
    Date: 2013–11
  2. By: Morgan Kelly (University College Dublin); Cormac Ó Gráda (University College Dublin)
    Abstract: We measure technological progress in oceanic shipping by using a large database of daily log entries from ships of the British and Dutch navies and East India Companies to estimate daily sailing speed in different wind conditions from 1750 to 1850. Against the consensus, dating back to North (1958, 1968), that the technology of sailing ships was static during this period, we find that average sailing speed in a moderate breeze (the usual summer conditions in the North Atlantic) rose by one third between 1780 and 1830; with greater increases at lower wind speeds. About one third of this improvement occurs when hulls are first copper plated in the 1780s, but the rest appears to be the result of incremental improvements in sails, rigging, and hull profiles.
    Keywords: economic history, technology, transport
    JEL: N O R
    Date: 2014–05–23
  3. By: Michaels, Guy; Rauch, Ferdinand
    Abstract: Do locational fundamentals such as coastlines and rivers determine town locations, or can historical events trap towns in unfavorable locations for centuries? We examine the effects on town locations of the collapse of the Western Roman Empire, which temporarily ended urbanization in Britain, but not in France. As urbanization recovered, medieval towns were more often found in Roman-era town locations in France than in Britain, and this difference still persists today. The resetting of Britain's urban network gave it better access to naturally navigable waterways when this was important, while many French towns remained without such access.
    Keywords: Economic Geography; Economic History; Path Dependence; Transportation
    JEL: N93 O18 R11
    Date: 2013–11
  4. By: Shiue, Carol Hua
    Abstract: This paper studies the pre-industrial origins of modern-day fertility decline. The setting is in Anhwei Province, China over the 13th to 19th centuries, a period well before the onset of China’s demographic transition and industrialization. There are four main results. First, we observe non-Malthusian effects in which high income households had relatively fewer children. Second, higher income households had relatively more educated sons, consistent with their greater ability to support major educational investments. Third, those households that invested in education had fewer children, suggesting that households producing educated children were reallocating resources away from child quantity and towards child quality. Fourth, over time, demand for human capital fell significantly. The most plausible reason is the declining returns to educational investments. The findings point to a role for demography in explaining China’s failure to industrialize early on.
    Keywords: Demographic transition; Economic history of China; Fertility; Human capital
    JEL: J11 O15
    Date: 2013–11
  5. By: Erkan Gören (University of Oldenburg, Department of Economics)
    Abstract: This paper empirically investigates the biogeographic determinants of the human DRD4 exon III locus, a particular gene variant associated with the human personality trait of novelty-seeking behavior. Providing a novel compilation of worldwide DRD4 exon III allele frequencies in a large sample of indigenous populations around the world, this study employs population-specific biogeographic characteristics using hig h-resolution geospatial data. The estimates suggest that migratory distance from East Africa naturally selects for specific novelty-seeking traits, even controlling for a broad range of biogeographic determinants. Notably, land suitability for pastoral nomadism is significantly related to DRD4 exon III diversity. This result provides further credence to the general observation that novelty-seeking traits are quite common in nomadic populations, explaining why some societies failed to settle and to develop centralized states.
    Keywords: Novelty-Seeking Behavior, Entrepreneurial Traits, Biogeography, Out of Africa Hypothesis, Gene-Culture Co-Evolution, Natural Selection
    JEL: N50 O10 Z10
    Date: 2014–05
  6. By: Battisti, Michele; Di Vaio, Gianfranco; Zeira, Joseph
    Abstract: This paper extends the standard growth regression model by adding an assumption that a country follows the global technology frontier either fully or partially. This additional assumption changes significantly the growth regression model and its results in three main ways. First, it shows that although a country converges to its long-run growth path, this path can diverge from the countries at the global frontier. We measure the degree of divergence for each country and find that most indeed diverge from the frontier. Second, we estimate growth dynamics without controlling for additional variables. Third, our new method enables us to disentangle the effects of the explanatory variables on the long-run rate of growth from the short-run effects.
    Keywords: Convergence; Divergence; Economic Growth; Global Frontier; Growth Regressions
    JEL: O40 O47 O57
    Date: 2013–10
  7. By: Manoel Bittencourt
    Abstract: I investigate whether primary school completion has played any role on total fertility rates in all fifteen countries of the Southern African Development Community (SADC) between 1980 and 2009. The evidence, based on panel time-series analysis (I use the Pooled OLS, Fixed Effects and Fixed Effects with Instrumental Variables estimators in order to deal with heterogeneity and endogeneity in thin panels), suggests that primary education has indeed reduced fertility rates in the SADC, or that the community is already trading-off quantity for quality of children. The results are important because lower fertility, caused by education, implies more capital per worker, higher productivity and therefore higher growth rates, and also because - in accordance to the unified growth theory - they suggest that the SADC, like other regions in the past, is experiencing its own transition from the Malthusian regime into sustained growth.
    Keywords: Education, Fertility, Africa, panel time-series
    JEL: I20 J13 O55
    Date: 2014
  8. By: Fuller, Brandon; Romer, Paul
    Abstract: Urbanization deserves urgent attention from policy makers, academics, entrepreneurs, and social reformers of all stripes. Nothing else will create as many opportunities for social and economic progress. The urbanization project began roughly 1,000 years after the transition from the Pleistocene to the milder and more stable Holocene interglacial. In 2010, the urban population in developing countries stood at 2.5 billion. The developing world can accommodate the urban population growth and declining urban density in many ways. The most important citywide projects -- successes like New York and Shenzhen -- show even more clearly how influential human intention can be. The developing world can accommodate the urban population growth and declining urban density in many ways. One is to have a threefold increase in the average population of its existing cities and a six fold increase in their average built-out area. Another, which will leave the built-out area of existing cities unchanged, will be to develop 625 new cities of 10 million people -- 500 new cities to accommodate the net increase in the urban population and another 125 to accommodate the 1.25 billion people who will have to leave existing cities as average density falls by half.
    Keywords: Population Policies,Urban Housing and Land Settlements,National Urban Development Policies&Strategies,City Development Strategies,ICT Applications
    Date: 2014–05–01
  9. By: Brückner, Markus; Gradstein, Mark
    Abstract: This paper presents instrumental variables estimates of the effects of GDP per capita volatility on the size of government. We show that for a panel of 157 countries spanning more than half a century rainfall volatility has a significant positive effect on GDP per capita volatility in countries with above median temperatures. In these countries rainfall volatility has also a significant positive reduced-form effect on the GDP share of government. There is no significant reduced-form effect in the sample of countries with below median temperatures where rainfall volatility has no significant effect on GDP per capita volatility. Using rainfall volatility as an instrumental variable in the sample of countries with above median temperatures yields that greater GDP per capita volatility leads to a significantly higher GDP share of government.
    Keywords: government size; Volatility
    JEL: E6 H1 O1
    Date: 2013–09
  10. By: Rafael Di Tella (Harvard Business School); Robert MacCulloch (University of Auckland)
    Abstract: Beliefs are one component of culture. Data from the World Values Survey is available on a subset of beliefs concerning (broadly) meritocracy and poverty that appear relevant for economics. We document how they vary as well as their distribution across countries. We then correlate these measures of beliefs with economic growth and compare them with institutional and geographical determinants of income. A strong negative relationship is found between leftist economic beliefs and growth but little evidence is found of a relationship with respect to non-economic beliefs. Finally, we briefly discuss some causal effects on beliefs. The evidence suggests that higher country risk and more dependence on natural resources shifts nations to a more leftist set of economic beliefs. Overall the evidence supports the view that cultural specificities may explain why certain institutions cannot be transplanted between nations with different cultural histories and underlines the limit to policy activism.
    Keywords: Beliefs, institutions, causality
    JEL: P16 E62
    Date: 2014–05
  11. By: Prados de la Escosura, Leandro
    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: economic liberty; negative freedom; OECD
    JEL: N10 O17 P10
    Date: 2014–03
  12. By: Cheremukhin, Anton; Golosov, Mikhail; Guriev, Sergei; Tsyvinski, Aleh
    Abstract: This paper studies structural transformation of Soviet Russia in 1928-1940 from an agrarian to an industrial economy through the lens of a two-sector neoclassical growth model. We construct a large dataset that covers Soviet Russia during 1928-1940 and Tsarist Russia during 1885-1913. We use a two-sector growth model to compute sectoral TFPs as well as distortions and wedges in the capital, labor and product markets. We find that most wedges substantially increased in 1928-1935 and then fell in 1936-1940 relative to their 1885-1913 levels, while TFP remained generally below pre-WWI trends. Under the neoclassical growth model, projections of these estimated wedges imply that Stalin’s economic policies led to welfare loss of -24 percent of consumption in 1928-1940, but a +16 percent welfare gain after 1941. A representative consumer born at the start of Stalin’s policies in 1928 experiences a reduction in welfare of -1 percent of consumption, a number that does not take into account additional costs of political repression during this time period. We provide three additional counterfactuals: comparison with Japan, comparison with the New Economic Policy (NEP), and assuming alternative post-1940 growth scenarios.
    Keywords: industrialization; Japan; Russia; Stalin; unbalanced growth
    JEL: E6 N23 N24 O4 O41
    Date: 2013–09
  13. By: Tabuchi, Takatoshi; Thisse, Jacques-François; Zhu, Xiwei
    Abstract: New economic geography focuses on the impact of falling transport costs on the spatial distribution of activities. However, it disregards the role of technological innovations, which are central to modern economic growth, as well as the role of migration costs, which are a strong impediment to moving. We show that this neglect is unwarranted. Regardless of the level of transport costs, rising labor productivity fosters the agglomeration of activities, whereas falling transport costs do not affect the location of activities. When labor is heterogeneous, the number of workers residing in the more productive region increases by decreasing order of productive efficiency when labor productivity rises.
    Keywords: labor heterogeneity; labor productivity; migration costs; new economic geography; technological progress
    JEL: J61 R12
    Date: 2014–03
  14. By: Keith, Michael
    Abstract: The great 21st-century migration into cities will present both a great challenge for humanity and a significant opportunity for global economic growth. This paper describes the diverse patterns that define this metropolitan migration. It then lays out a framework for understanding the costs and benefits of new arrivals through migration's externalities and the challenges and policy tradeoffs that confront city stakeholders. The paper concludes by suggesting ways municipalities, by optimizing flexibility, can make migration more productive and less destructive in shaping the'good city'and the'smart city.'There are few paths to global economic growth that do not run through cities, and even fewer that do not depend on growing the city in population size, scale, and economic exchange. Historically, cities have grown by concentrating the economic advantages of number and density, the social potential of innovation, and the cultural possibilities of newness. By bringing together the factors of production, land, labor, capital, and enterprise, in ever more recombinant forms, cities offer the possibility of securing new economic advantages and scaling them up.
    Keywords: Population Policies,Municipal Financial Management,Housing&Human Habitats,Anthropology,National Urban Development Policies&Strategies
    Date: 2014–05–01
  15. By: Matthew O. Jackson; Stephen M. Nei
    Abstract: We investigate the role of networks of military alliances in preventing or encouraging wars between groups of countries. A country is vulnerable to attack if some allied group of countries can defeat the defending country and its (remaining) allies based on their collective military strengths. We show that there do not exist any networks which contain no vulnerable countries and that are stable against the pairwise addition of a new alliance as well as against the unilateral deletion of any existing alliance. We then show that economic benefits from international trade provide incentives to form alliances in ways that restore stability and prevent wars, both by increasing the density of alliances so that countries are less vulnerable and by removing the incentives of countries to attack their allies. In closing, we examine historical data on interstate wars and trade, noting that a dramatic (more than ten-fold) drop in the rate of interstate wars since 1950 is paralleled by the advent of nuclear weapons and an unprecedented growth in trade over the same period, matched with a similar densification and stabilization of alliances, consistent with the model.
    Date: 2014–05
  16. By: Markus Lampe; Paul Sharp
    Abstract: The late nineteenth century Danish agricultural revolution saw the modernization and growth of the dairy industry. Denmark rapidly caught up with the leading economies, and Danish dairying led the world in terms of productivity. Uniquely in a world perspective, high quality micro-level data exist documenting this episode. These allow the use of the tool of modern agricultural economists, stochastic frontier analysis, to estimate production functions for milk and thus find the determinants of these productivity and efficiency advances. We identify the contribution of modernization through specific new technologies and practices.
    Keywords: Dairies, Denmark, Development, Stochastic Frontier Analysis
    JEL: L2 N5 O3 Q1
    Date: 2014–05
  17. By: Mario Coccia (Ceris - Institute for Economic Research on Firms and Growth,Turin, Italy)
    Abstract: Population growth is one of the major problems facing the world today because it affects the pattern of sustainable economic growth. Theory of endogenous growth shows that total research output increases faster than proportionally with population due to increases in the size of the market, more intensive intellectual contact and greater specialization. The study here analyses the relationship between population growth and level of technological outputs (patent applications of residents), focusing on OECD countries. The study seems to show the existence of an inverted-U shaped curve between the growth rate of population and the patents with an optimal zone in which the average rate of growth of the population (roughly 0.3131%) is likely to be associated to a higher level of technological outputs. The policy implications of the study are that, in average, it is difficult to sustain a optimal level of technological outputs either with a low (lower than 0.2197%) or high (higher than 1.0133%) average growth rate of population (annual). In addition, the estimated relationship of technological outputs vs. population growth tends to be affected by decreasing returns of technological innovation to population growth.
    Keywords: Population, Population Growth, Innovation, Technological Change, Demographic Change, Patents, Economic Change
    JEL: O33 J10
    Date: 2013–06
  18. By: Huikang Ying
    Abstract: This paper proposes a dual growth model built on a mechanism of self-selection whereby heterogeneous workers choose their optimal sectors based on comparative advantage. It shows that economic growth shifts workers’ comparative advantage, and this shift induces rural-urban structural change. Following this mechanism, the model shows that average individual productivity in agriculture increases, while that in the non-agriculture sector decreases during structural change. Findings from simulations suggests an inverse correlation between the speed of structural change and dispersion of productivity across workers, and present improved predictions on transitional dynamics compared to the standard neoclassical growth model. The analysis of wage dynamics suggests that inequality over time does not necessarily follow an inverted-U curve when structural transformation takes place.
    Keywords: structural change, self-selection, labor productivity, wage dynamics
    JEL: J24 J31 O11 O15 O40
    Date: 2014–05
  19. By: Bird, Julia; Straub, Stéphane
    Abstract: This paper studies the impact of the rapid expansion of the Brazilian road network, which occurred from the 1960s to the 2000s, on the growth and spatial allocation of population and economic activity across the country's municipalities. It addresses the problem of endogeneity in infrastructure location by using an original empirical strategy, based on the "historical natural experiment" constituted by the creation of the new federal capital city Brasília in 1960. The results reveal a dual pattern, with improved transport connections increasing concentration of economic activity and population around the main centers in the South of the country, while spurring the emergence of secondary economic centers in the less developed North, in line with predictions in terms of agglomeration economies. Over the period, roads are shown to account for half of pcGDP growth and to spur a signifficant decrease in spatial inequality.
    Keywords: Transport costs, Infrastructure, Roads, Brazil
    JEL: F15 N76 N96 O18 R11 R12 R40
    Date: 2014–05
  20. By: Mario Amendola (Università degli studi di Roma la Sapienza); Jean Luc Gaffard (OFCE sciences-po, Skema Busioness School, Univercity of Nice Sophie Antipolis)
    Abstract: Novelty and hysteresis are the main engines of economic evolution. However, they are also at the origin of co-ordination issues, as the consequences of any innovative choice can never be fully expected. Thus, there is no sense in analysing economic change as an intertemporal equilibrium with rational expectations. Not only growth and fluctuations cannot be dissociated, but there is no long-term trend that would be independent from what happens in the short- term. The explicit consideration of essential evolutionary phenomena like novelty and hysteresis help a clearer understanding of some important episodes of contemporaneous economic history. The periods considered are characterized by crises and structural changes, and it is exactly when important disturbances affect the functioning of the economies that the relevant features of their behaviour come to the surface and hence the right interpretations of the phenomena taking place, with the adequate policy implications, can be formulated
    Date: 2014–05
  21. By: Manoel Bittencourt
    Abstract: In this paper I investigate whether secondary school enrollment has played any role on total fertility rates in all …fifteen countries of the Southern African Development Community (SADC) between 1980 and 2009. The evidence, based on panel time-series analysis (I make use of the Pooled OLS, Fixed Effects, Common Correlated Effects and Fixed Effects with Instrumental Variables estimators), robustly suggest that education has reduced fertility rates in the community, or that the community is already trading-o¤ quantity for quality of children. The results are important because lower fertility, caused by education, implies more capital per worker, higher productivity and therefore higher growth rates, and also because— in accordance to the uni…ed growth theory— they suggest that southern Africa is experiencing its own transition from the Malthusian regime into sustained modern growth.
    Keywords: Education, Fertility, Africa
    JEL: I20 J13 O55
    Date: 2014
  22. By: Bender, Dieter; Loewenstein, Wilhelm
    Abstract: Based on a neoclassical growth model for open low income economies this paper shows that development strategies, which rely on net borrowing abroad lead to a position of sustainable foreign indebtedness (provided that all capital imports are used for investment financing), but turn out to be immiserizing. The paper proves that development financing by foreign loans is either ineffective in terms of increasing per capita income but associated by sustainable foreign debts, or the effectiveness is bought at the price of growing into unsustainable debt positions. The first option is stable but counterproductive. The second option is effective but unstable.
    Keywords: Immioserizing growth; Foreign debt; Low income countries
    JEL: F34 F43 O41
    Date: 2014
  23. By: Ponzetto, Giacomo AM; Troiano, Ugo
    Abstract: The impact of social capital on economic growth is empirically well documented. Yet the reasons for this relationship remain theoretically understudied. We present a tractable stochastic endogenous growth model that explains how social capital influences economic development. In our model, social capital increases citizens' awareness of government activity. As a consequence, we find it alleviates the electoral incentives to under-invest in education, whose returns are delayed in time and relatively less visible to voters. In the dynamic equilibrium, higher social capital increases both the amount and the efficiency of public investment in education, permanently raising the growth rate. Our theory predicts that higher and more homogeneously distributed social capital should increase public expenditure on education. We provide suggestive cross-country evidence consistent with these predictions.
    Keywords: Economic Growth; Education Expenditures; Elections; Government Expenditures; Imperfect Information; Social Capital
    JEL: D72 D83 H52 I22 I25 O43 Z13
    Date: 2014–03
  24. By: Bai, Jie; Jayachandran, Seema; Malesky, Edmund J.; Olken, Benjamin
    Abstract: Government corruption is more prevalent in poor countries than in rich countries. This paper uses cross-industry heterogeneity in growth rates within Vietnam to test empirically whether growth leads to lower corruption. We find that it does. We begin by developing a model of government officials' choice of how much bribe money to extract from firms that is based on the notion of inter-regional tax competition, and consider how officials' choices change as the economy grows. We show that economic growth is predicted to decrease the rate of bribe extraction under plausible assumptions, with the benefit to officials of demanding a given share of revenue as bribes outweighed by the increased risk that firms will move elsewhere. This effect is dampened if firms are less mobile. Our empirical analysis uses survey data collected from over 13,000 Vietnamese firms between 2006 and 2010 and an instrumental variables strategy based on industry growth in other provinces. We find, first, that firm growth indeed causes a decrease in bribe extraction. Second, this pattern is particularly true for firms with strong land rights and those with operations in multiple provinces, consistent with these firms being more mobile. Our results suggest that as poor countries grow, corruption could subside
    Keywords: corruption; economic growth
    JEL: D73 O43
    Date: 2013–10
  25. By: Zeba Anjum (Crawford School of Public Policy, The Australian National University); Paul J. Burke; Reyer Gerlagh; David I. Stern
    Abstract: We adopt a new representation of the relationship between emissions and income using long-run growth rates. Our approach allows us to test multiple hypotheses about the drivers of per capita emissions in a single framework and avoid several of the econometric issues that have plagued previous studies. We find that for carbon dioxide emissions, scale, convergence, and resource endowment effects are statistically significant. For sulfur emissions, the scale and convergence effects are significant, there is a strong negative time effect, and non-English legal origin and higher population density are associated with more rapidly declining emissions. The environmental Kuznets effect is not statistically significant in our full sample for either carbon or sulfur.
    Keywords: Economic growth, decoupling, pollution, environmental Kuznets curve, convergence
    JEL: Q56 O44
    Date: 2014–05
  26. By: Busse, Matthias; Erdogan, Ceren; Muehlen, Henning
    Abstract: We investigate the impact of Chinese activities in sub-Saharan African countries with respect to the growth performance of economies in that region. Using a Solow-type growth model and panel data for the period 1991 to 2011, we find that African economies that export natural resources have benefited from positive terms-of-trade effects. In addition, there is evidence for displacement effects of African firms due to competition from China. Chinese foreign investment and aid in Africa does not have an impact on growth.
    Keywords: China; Sub-Saharan Africa; Trade; FDI; Foreign aid; Economic growth; South-south cooperation
    JEL: F14 F23 F35 O47
    Date: 2014
  27. By: Susanne Fricke (Chair of Economic Policy, Friedrich-Schiller-University Jena); Bianka Dettmer (Chair of Economic Policy, Friedrich-Schiller-University Jena)
    Abstract: While previous studies highlight the importance of the manufacturing sector in the economy, we argue that rather backbone services play a key role for economic growth. We perform an Input-Output analysis to determine the linkages between backbone services and manufacturing in South Africa. We find high and evenly spread forward linkages of backbone services to the rest of the economy which indicate strong growth- inducing downstream effects. Moreover, the interconnectedness between backbone services and manufacturing is twofold and depends on the level of technology intensity of industries. Especially the production of high technology goods requires a relatively higher share of inputs from backbone services. Thus, an efficient provision of backbone services is essential to induce manufacturing production and enable economic growth in South Africa.
    Keywords: Backbone Services, Growth, Input-Output Analysis, South Africa
    JEL: L8 L9 O1 O4 R15
    Date: 2014–05–22
  28. By: Campos, Nauro F; Coricelli, Fabrizio; Moretti, Luigi
    Abstract: This paper presents new estimates of the economic benefits from economic and political integration. Using the synthetic counterfactuals method, we estimate how GDP per capita and labour productivity would have behaved for the countries that joined the European Union (EU) in the 1973, 1980s, 1995 and 2004 enlargements, if those countries had not joined the EU. We find large positive effects from EU membership but these differ across countries and over time (they are only negative for Greece). We calculate that without deep economic and political integration, per capita incomes would have been, on average, approximately 12 percent lower.
    Keywords: economic growth; European Union; synthetic counterfactuals
    JEL: C33 F15 F43 O52
    Date: 2014–05
  29. By: Mennuni, Alessandro; Gervais, Martin
    Abstract: This paper studies optimal taxation in a version of the neoclassical growth model in which investment becomes productive within the period, thereby making the supply of capital elastic in the short run. Because taxing capital is distortionary in the short run, the government's ability/desire to raise revenues through capital income taxation in the initial period or when the economy is hit with a bad shock is greatly curtailed. Our timing assumption also leads to a tractable Ramsey problem without state-contingent debt, which can give rise to debt-financed budget deficits during recessions.
    Date: 2014–02–01
  30. By: Cohen, Daniel; Leker, Laura
    Abstract: During the XXth century, life expectancy levels have converged across the world. Yet, macroeconomic studies, as Acemoglu and Johnson (2007), estimate that improvements in health have no impact on growth or any factors of growth; in particular, they find no impact of life expectancy increases on education. We argue that their pessimistic results with respect to schooling investment is due to the use of an imprecise proxy. Indeed, when life expectancy increases at time t, only the cohort born at t should increase its human capital investment. On the contrary, Acemoglu and Johnson (2007) look at the impact of life expectancy improvements on the average education of the whole population aged above 15, which evolves much slower. We have reproduced their estimations with a cohort-based measure of education and find a positive and significant impact of life expectancies on education, of a magnitude between 20% and 47%. Finally, we use both the Cohen-Soto (2007) and the Barro-Lee (2010-2013) databases on education, and explain in the text why the former delivers better results than the latter.
    Keywords: education; growth; life expectancy
    JEL: O10
    Date: 2014–04
  31. By: Andersen, Torben M; Kreiner, Claus Thustrup
    Abstract: If productivity increases more slowly for services than for manufactured goods, then services suffer from Baumol’s cost disease and tend to become relatively more costly over time. Since the welfare state in all countries is an important supplier of tax financed services, this translates into a financial pressure which seems to leave policymakers with a trilemma; increase taxes (and hence tax distortions), cut spending or redistribute less. Under the assumptions underlying Baumol’s cost disease, we show that these dismal implications are not warranted. The welfare state is sustainable and Baumol growth leaves scope for Pareto improvements.
    Keywords: publicly provided goods; redistribution; tax distortions; Welfare state sustainability
    JEL: H21 H4 H5
    Date: 2013–12
  32. By: Taylor, Alan M.
    Abstract: The economic history of Argentina presents one of the most dramatic examples of divergence in the modern era. What happened and why? This paper reviews the wide range of competing explanations in the literature and argues that, setting aside deeper social and political determinants, the various economic mechanisms in play defy the idea of a monocausal explanation.
    Keywords: divergence; finance; growth; institutions; Latin America; policies; trade
    JEL: F43 N16 O11 O54 O57 P52
    Date: 2014–03
  33. By: Bagchi, Sutirtha; Svejnar, Jan
    Abstract: A fundamental question in social sciences relates to the effect of wealth inequality on economic growth. Yet, in tackling the question, researchers have had to use income as a proxy for wealth. We derive a global measure of wealth inequality from Forbes magazine’s listing of billionaires and compare its effect on growth to the effects of income inequality and poverty. We find that wealth inequality reduces economic growth, but when we control for the fact that some billionaires acquired wealth through political connections, the effect of politically connected wealth inequality is negative, while politically unconnected wealth inequality, income inequality, and initial poverty have no significant effect.
    Keywords: Billionaires; Economic Growth; Income Inequality; Political Connections; Wealth Inequality
    JEL: D31 O40 O43
    Date: 2014–01
  34. By: Keller, Wolfgang; Shiue, Carol Hua
    Abstract: The paper introduces a framework for studying the hierarchy of growth factors, from deep to more immediate. The specific setting we examine is 18th and 19th century Germany, when institutional changes introduced by reforms and transportation improvements converged to create city growth. We assess the impact of institutions on growth by allowing two ways for institutions to affect growth. Institutions can directly affect growth, or it can impact on trade, which in turn affects growth. Once we separately quantify the link from institutions to trade, and trade to growth, the independent effect of institutions on growth is small. This suggests that part of what is often understood as trade's effect on growth can be attributed to institutional change. It is straightforward to apply this framework to other settings.
    Keywords: growth; institutions; trade
    JEL: F1 O1
    Date: 2014–03
  35. By: Ko Shakuno
    Abstract: Using a closed-economy overlapping generations model with en- dogenous fertility, child quality choice and human capital accumula- tion, this paper examine the effects of public investment in education on fertility rate and per capita output growth rate under a pay-as-you- go (PAYG) social security system. Parents face a trade-off between the quantity and quality of children. Differently from previous studies, this paper shows that there is an inverted U-shaped relation between pub- lic investment in education and fertility. Small sized public education policy stimulates fertility and impedes growth.
    Date: 2014–05
  36. By: Jung, Juan
    Abstract: The aim of this paper is to perform an analysis of the impact of broadband on regional productivity in Brazil. The possibility of performing a regional approach, instead of the usual country-level analysis, constitutes an opportunity to decode the economic impact of broadband at territories which share a common institutional and regulatory framework as are the regions inside a same country. The main focus of this paper is to find out if the economic impact of broadband is uniform across all territories of the country. Results suggest that the impact of broadband on productivity is not uniform across regions, and seems to be yielding higher productivity gains for less developed regions, a result which is robust after controlling for differences in quality, network effects, human capital, sectorial composition, urbanism and the age of the workforce. Another important result verified in this paper is that faster download speed and critical mass to account for network externalities enhance of the economic impact of broadband. The fact that most underdeveloped regions in Brazil seem to be benefiting more from broadband may suggest that broadband can constitute a factor favoring regional cohesion in Brazil, although further research will be needed to confirm that asseveration.
    Keywords: Broadband, Information and Communication Technologies, Regional Productivity
    JEL: O33 O47 R11
    Date: 2014–05–23
  37. By: Gennaioli, Nicola; Shleifer, Andrei; Vishny, Robert
    Abstract: We introduce the model of asset management developed in Gennaioli, Shleifer, and Vishny (GSV, 2014) into a Solow-style neoclassical growth model with diminishing returns to capital. Savers rely on trusted intermediaries to manage their wealth (claims on capital stock), who can charge fees above costs to trusting investors. In this model, the ratio of financial income to GDP increases with the ratio of aggregate wealth to GDP. Both rise along the convergence path to steady state growth. We examine several further implications of the model for management fees, unit costs of finance, and the consequences of shocks to trust and to the capital stock.
    Keywords: Finance Income Share; Wealth Preservation
    JEL: E00 G00
    Date: 2014–03
  38. By: Kollintzas, Tryphon; Papageorgiou, Dimitris; Vassilatos, Vanghelis
    Abstract: The wage premium in the public sector, as measured by the ratio of the average wage rate in the public sector relative to the average wage rate in the private sector, varies considerably across developed economies. And, varies in some developed economies over large periods of time. Further, this wage premium in the public sector correlates negatively with the conditional growth rate, in a representative panel of developed economies. This paper develops a simple neoclassical growth model, motivated by the paradigm of the South European countries that top the list of developed economies with the highest wage premium in the public sector, to provide for a unifying explanation for these stylized facts. According to this model, the latter are consequences of the different organization of the labor market and an associated political system complementarity. Labor supply consists of two groups: “outsiders”, that are employed by the private sector (final good) and take the wage rate as given, and “insiders” that are employed by the public sector (services associated with intermediate goods, such as basic networks and utilities) and are members of unions that set the wage rate. In this case, there will be a wage premium in the public sector and an associated labor misallocation effect. The number of intermediate goods raises the wage premium due to the assumed gross complementarity in the production of the final good. Thus, unions have an incentive to cooperate, so as to control/influence government and, thereby, the maintenance of existing and the creation of new intermediate goods. This is the above mentioned political system complementarity. Whether, steady state output and growth towards the steady state rise or fall with an increase in the number of intermediate goods, depends on the existing number of these goods. If this number is relatively low (high), the “variety” effect dominates over (is dominated by) the combination of the labor misallocation and distorting taxation effects. The latter stems from distortionary income taxation, needed to finance the infrastructure of the publicly provided intermediate goods. Then, it is shown that, for plausible parameter values, in the steady state, a “government of insiders”, that seeks to maximize the aggregate of insiders’ unions utilities, will tend to have a higher number of publicly provided intermediate goods than the number that would have been chosen by the Median Voter. These results form the basis for explaining the above mentioned stylized facts, as well as important aspects of the present crisis of the South European economies.
    Keywords: growth; insiders-outsiders; political institutions; public sector wage premium; varieties of capitalism
    JEL: J31 J45 O43 O52 P16
    Date: 2013–09
  39. By: Patrick DoupŽ (Crawford School of Public Policy, The Australian National University; Potsdam Institute for Climate Impact Research)
    Abstract: The clearing of forests for agricultural land and other marketable purposes is a well-trodden path of economic development. With these private benefits from deforestation come external costs: emissions from deforestation currently account for 12 per cent of global carbon emissions. A widespread intervention in reducing emissions from deforestation will affect the paths of agricultural expansion and economic growth of lower income nations. To investigate these processes, this paper presents a general, dynamic, stochastic model of deforestation and economic growth. The model is shown to generate unique deforestation and investment paths and a model without reduced deforestation policy is shown to have a stationary distribution of income and landholdings. There are three main findings. First, in the short run national output growth falls with compensation for reduced deforestation. Second, deforestation rates are reduced through compensating either reduced deforestation directly or the stock of forests; however, compensating the stock of forests is likely to be prohibitively expensive. Finally, by offering a fixed compensation rate, as opposed to a compensation rate tied to a stochastic carbon price, further reductions in deforestation can be achieved.
    Keywords: Reduced deforestation, economic growth, climate policy, stochastic stability
    JEL: Q38 Q56
    Date: 2014–02
  40. By: de Melo, Jaime
    Abstract: This paper discusses the state of knowledge about the trade-related environmental consequences of a country’s development strategy along three channels: (i) direct trade-environment linkages (overexploitation of natural resources and trade-related transport costs);(ii) ‘virtual trade’ in emissions resulting from production activities; (iii) the product mix attributes of a ‘green-growth’ strategy (environmentally preferable products and goods for environmental management). Main conclusions are the following. Trade exacerbates over-exploitation of natural resources in weak institutional environments, but there is little evidence that differences in environmental policies across countries has led to significant ‘pollution havens’. Trade policies to ‘level the playing field’ would be ineffective and result in destructive conflicts in the WTO. Lack of progress at the Doha round suggests the need to modify the current system of global policy making.
    Keywords: Environmental goods; green growth; natural resources; trade and climate
    JEL: F18 Q56
    Date: 2013–09
  41. By: Taiji Hagiwara (Graduate School of Economics, Kobe University); Yoichi Matsubayashi (Graduate School of Economics, Kobe University)
    Abstract: We empirically examine the relationship between capital accumulation and vintage as well as the productivity of industries in Japan from 1980 to 2007. Based on the empirical analyses, we confirmed that vintage exerted a significant influence on the productivity during the period of economic expansion, particularly during the economic upturn that started in 2000, where strong vintage effects were observed in all industries. The rejuvenation of capital equipment during this period clearly resulted from a strong productivity effect. In contrast, during the bubble period of the late 1980s, vintage exerted no observable effects on productivity despite significant increases in investment. This finding shows that increase of capital stock during this period was not necessarily Productive and was likely to produce a merely temporary boom. From this view, we reconfirm that the relationship between vintage and productivity changed in subtle ways in response to the phases of business cycles.
    Keywords: Vintage, productivity, Business cycle
    JEL: F32 F41
    Date: 2014–05

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