nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒07‒13
twenty-one papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. The Wind of Change: Maritime Technology, Trade and Economic Development By Pascali, Luigi
  2. Does Female Empowerment Promote Economic Development? By Doepke, Matthias; Tertilt, Michèle
  3. The Network Origins of Economic Growth By Dürnecker, Georg; Meyer, Moritz; Vega-Redondo, Fernando
  4. Dissecting the Act of God - An Exploration of the Effect of Religion on Economic Activity By Jean-François Carpantier; Anastasia Litinia
  5. Debt and Growth: Is There a Magic Threshold? By Andrea Pescatori; Damiano Sandri; John Simon
  6. Redistribution, Inequality, and Growth By Jonathan David Ostry; Andrew Berg; Charalambos G. Tsangarides
  7. On the Allocation of Time By Dürnecker, Georg; Herrendorf, Berthold
  8. Existence of equilibrium on OLG economies with durable goods. By Lalaina Rakotonindrainy
  9. Austerity, fiscal volatility, and economic growth By Curatola, Giuliano; Donadelli, Michael; Gioffré, Alessandro; Grüning, Patrick
  10. A Spatial Analysis of Incomes and Institutional Quality : Evidence from US Metropolitan Areas By Jamie Bologna; Donald J. Lacombe; Andrew T. Young
  11. The GDP per capita of the Mexican regions (1895-1930): new estimates By José Aguilar-Retureta
  12. Kant’s Endogenous Growth Mechanism By Gabriel Fagan; Vito Gaspar; Peter McAdam
  13. The Relationship between Population Growth and Economic Growth Over 1870-2013: Evidence from a Bootstrapped Panel-Granger Causality Test By Tsangyao Chang; Hsiao-Ping Chu; Frederick W. Deale; Rangan Gupta
  14. Culture values and economic growth By Jellal, Mohamed
  15. India: Defining and Explaining Inclusive Growth and Poverty Reduction By Rahul Anand; Volodymyr Tulin; Naresh Kumar
  16. Does corruption impede economic growth in Pakistan ? By Abdul Farooq; Muhammad Shahbaz; Mohamed Arouri; Frédéric Teulon
  17. Sir W. Arthur Lewis and the Africans: Overlooked Economic Growth Lessons By Amavilah, Voxi Heinrich
  18. Knowledge Spillovers, ICT and Productivity Growth By Corrado, Carol; Haskel, Jonathan; Jona-Lasinio, Cecilia
  19. Climate change, industrial transformation, and"development traps" By Golub, Alexander; Toman, Michael
  20. Inequality is bad for growth of the poor (but not for that of the rich) By van der Weide, Roy; Milanovic, Branko
  21. Economic Growth and Government Spending in Saudi Arabia: an Empirical Investigation By Saad A. Alshahrani; Ali J. Alsadiq

  1. By: Pascali, Luigi (Department of Economics, University of Warwick)
    Abstract: The 1870-1913 period marked the birth of the first era of trade globalization. How did this tremendous increase in trade affect economic development? This work isolates a causality channel by exploiting the fact that the steamship produced an asymmetric change in trade distances among countries. Before the invention of the steamship, trade routes depended on wind patterns. The introduction of the steamship in the shipping industry reduced shipping costs and time in a disproportionate manner across countries and trade routes. Using this source of variation and a completely novel set of data on shipping times, trade, and development that spans the great majority of the world between 1850 and 1900, I find that 1) the adoption of the steamship was the major reason for the first wave of trade globalization, 2) only a small number of countries that were characterized by more inclusive institutions benefited from globalization, and 3) globalization exerted a negative effect on both urbanization rates and economic development in most other countries. Key words: Steamship ; Gravity ; Globalization JEL classification: F1 ; F15 ; F43 ; O43
    Date: 2014
  2. By: Doepke, Matthias; Tertilt, Michèle
    Abstract: Empirical evidence suggests that money in the hands of mothers (as opposed to fathers) increases expenditures on children. From this, should we infer that targeting transfers to women is good economic policy? In this paper, we develop a non-cooperative model of household decision making to answer this question. We show that when women have lower wages than men, they may spend more on children, even when they have exactly the same preferences as their husbands. However, this does not necessarily mean that giving money to women is a good development policy. We show that depending on the nature of the production function, targeting transfers to women may be beneficial or harmful to growth. In particular, such transfers are more likely to be beneficial when human capital, rather than physical capital or land, is the most important factor of production.
    Date: 2014
  3. By: Dürnecker, Georg; Meyer, Moritz; Vega-Redondo, Fernando
    Abstract: In this paper, we propose a new approach to represent a country's outward orientation. Prior work mostly uses indicators of aggregate trade intensity, trade policy or trade restrictiveness. Our approach offers a broader perspective as it measures a country's level of integration not only by its set of direct trade connections with the rest of the world but also through the full architecture of its second, third, and all other higher-order connections. We apply our methodology to a sample of 167 countries spanning the period from 1962 to 2009 and perform a Bayesian modelaveraging analysis on the determinants of growth. We find a prominent positive effect of integration on a country's level of per capita income, while the aforementioned traditional measures of outward orientation display only a secondary, largely insignificant, weight. This, we argue, highlights the network basis of economic growth and adds a novel perspective to the notion of economic openness. We also perform several sensitivity checks and conclude that our baseline findings are extremely robust to different data input and alternative assumptions about the computation of country integration.
    Keywords: Globalization , Trade Integration , Economic Growth , Network Analysis , Dynamic Panel Model , Bayesian Model Averaging
    JEL: C11 D85 F15 O40
    Date: 2014
  4. By: Jean-François Carpantier (CREA, Université de Luxembourg); Anastasia Litinia (CREA, Université de Luxembourg)
    Abstract: This research establishes that religiosity has a persistent effect on economic outcomes. First we use a sample of migrants in the US to establish that religiosity at the country of origin has a long lasting effect on the religiosity of migrants. Second, exploiting variations in the inherited component of religiosity of migrants, our analysis uncovers the causal effect of religiosity on economic activity using a panel of countries for the period 1935- 2000. The empirical findings suggest that i) church attendance has a positive impact on economic outcomes; ii) religious beliefs in the existence of god, hell, heaven and miracles have no systematic effect on economic outcomes, and iii) stronger faith is associated with prosperity. Moreover we extend our analysis to uncover the channels via which religiosity operates. Notably, the positive effect of religious participation and of stronger faith on economic outcomes operates via the creation of social capital and the development of traits, such as hard work and thrift, that are conducive to growth.
    Keywords: Religiosity, Growth, Beliefs, Migration, Culture
    JEL: A1 Z12 Z13
    Date: 2014
  5. By: Andrea Pescatori; Damiano Sandri; John Simon
    Abstract: Using a novel empirical approach and an extensive dataset developed by the Fiscal Affairs Department of the IMF, we find no evidence of any particular debt threshold above which medium-term growth prospects are dramatically compromised. Furthermore, we find the debt trajectory can be as important as the debt level in understanding future growth prospects, since countries with high but declining debt appear to grow equally as fast as countries with lower debt. Notwithstanding this, we find some evidence that higher debt is associated with a higher degree of output volatility.
    Keywords: Public debt;Economic growth;Economic models;Sovereign debt, growth
    Date: 2014–02–13
  6. By: Jonathan David Ostry; Andrew Berg; Charalambos G. Tsangarides
    Abstract: The Fund has recognized in recent years that one cannot separate issues of economic growth and stability on one hand and equality on the other. Indeed, there is a strong case for considering inequality and an inability to sustain economic growth as two sides of the same coin. Central to the Fund’s mandate is providing advice that will enable members’ economies to grow on a sustained basis. But the Fund has rightly been cautious about recommending the use of redistributive policies given that such policies may themselves undercut economic efficiency and the prospects for sustained growth (the so-called “leaky bucket†hypothesis written about by the famous Yale economist Arthur Okun in the 1970s). This SDN follows up the previous SDN on inequality and growth by focusing on the role of redistribution. It finds that, from the perspective of the best available macroeconomic data, there is not a lot of evidence that redistribution has in fact undercut economic growth (except in extreme cases). One should be careful not to assume therefore—as Okun and others have—that there is a big tradeoff between redistribution and growth. The best available macroeconomic data do not support such a conclusion.
    Keywords: Income distribution;Economic growth;Government expenditures;Political economy;Redistribution, Inequality, and Growth
    Date: 2014–02–17
  7. By: Dürnecker, Georg; Herrendorf, Berthold
    Abstract: We document for the US and Continental Europe that home–production time remained essentially flat during the last 50 years while changes in market time and leisure offset each other. We then focus on the US and France during 1970–2005 which are on the opposite sides of the spectrum: while US market time did not change much, French market time decreased most strongly. We document for the US and France that capital in home production and imputed labor productivities of home production have risen. We build a version of the growth model with capital in market and home production to account for the time allocation in both countries. We find that the interaction between taxes, home capital, and home–labor–augmenting technical change is crucial.
    Keywords: time allocation , home production , leisure , taxes
    JEL: B1 J4
    Date: 2014
  8. By: Lalaina Rakotonindrainy (Centre d'Economie de la Sorbonne)
    Abstract: We consider a standard pure exchange overlapping generations economy. The demographic structure consists of a new cohort of agents at each period with an economic activity extended over two successive periods. Our model incorporates durable goods that may be stored from one period to a successive period through a linear technology. In this model, we intend to study the mechanism of transfer between generations, and we show that the existence of an equilibrium can be established by considering an equivalent economy “without” durable goods, where the agents economic activity is extended over three successive periods.
    Keywords: Overlapping generations model, durable goods, irreducibility, equilibrium, existence.
    JEL: C62 D50 D62
    Date: 2014–05
  9. By: Curatola, Giuliano; Donadelli, Michael; Gioffré, Alessandro; Grüning, Patrick
    Abstract: This paper contributes to the ongoing debate on the relationship between austerity measures and economic growth. We propose a general equilibrium model where (i) agents have recursive preferences; (ii ) economic growth is endogenously driven by investments in R&D; (iii) the government is committed to a zero-deficit policy and finances public expenditures by means of a combination of labor taxes and R&D taxes. We find that austerity measures that rely on reducing resources available to the R&D sector depress economic growth both in the short- and long-run. High debt EU members are currently implementing austerity measures based on higher taxes and/or lower investments in the R&D sector. This casts some doubts on the real ability of these countries to grow over the next years. --
    Keywords: Austerity Measures,Fiscal Policy,Endogenous Growth,R&D
    JEL: G12 G15
    Date: 2014
  10. By: Jamie Bologna (West Virginia University, College of Business and Economics); Donald J. Lacombe (West Virginia University, Department of Agricultural and Natural Resource Economics); Andrew T. Young (West Virginia University, College of Business and Economics)
    Abstract: We use the Stansel (2013) metropolitan area economic freedom index and 25 conditioning variables to analyze the spatial relationships between institutional quality and economic outcomes across 381 U.S. metropolitan areas. Specifically, we allow for spatial dependence in both the dependent and independent variables and estimate how economic freedom impacts both per-capita income growth and per-capita income levels. We find that while economic freedom and income levels are directly and positively related, increases in economic freedom in one area result in negative indirect effects on income levels in surrounding areas. In addition, we find that economic freedom has an insignificant relationship with economic growth.
    Keywords: institutional quality, economic freedom, income levels, income growth, spatial dependence, spillovers
    JEL: O43 O12
    Date: 2014–03
  11. By: José Aguilar-Retureta (Universitat de Barcelona,Barcelona,Spain)
    Abstract: So far, apart from Appendini (1972) for 1900, there were no Mexican regional GDP estimates for the period before 1930. The aim of this paper is to fill this gap by presenting new Mexican regional GDP pc estimates for several benchmark years between 1895 and 1930. The paper presents the methodology and sources used to estimate the new series, compares them with the previous estimates, and offers a first long-term picture of Mexican regional pc GDPs (1895-2010).
    Keywords: Palabras clave: Mexican Regional GDP, Regional Inequalities, Economic History Growth.
    JEL: N16 N96 R11
    Date: 2014–07
  12. By: Gabriel Fagan (European Central Bank); Vito Gaspar (International Monetary Fund); Peter McAdam (European Central Bank and University of Surrey)
    Abstract: Despite the modern origins of endogenous growth theory, we argue that the ‘Idea for a Universal History with a Cosmopolitan Aim’ written by Immanuel Kant in 1784 provides an early and coherent example of such a theory. Kant’s endogenous growth mechanism is driven by the inherent rivalry that exists between agents which increases effort and strengthens the accumulation of knowledge, which in turn is carried through generations. In an exercise in rational reconstruction, we present a mathematical model of Kant’s mechanism. We use the model to contribute to the contemporary policy debate as to whether “keeping up with the Joneses†leads to excessive effort.
    JEL: A12 B3 N0 O38 O40 P1
    Date: 2014–06
  13. By: Tsangyao Chang (Department of Finance, Feng Chia University, Taichung, Taiwan); Hsiao-Ping Chu (Department of Business Administration, Ling-Tung University, Taichung, Taiwan); Frederick W. Deale (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: This study applies the bootstrap panel causality test proposed by Kónya (2006), which accounts for both dependency and heterogeneity across countries, to test the causal link between population growth and economic growth in 21 countries over the period of 1870-2013. With regards to the direction of population growth-economic growth nexus, we found one-way Granger causality running from population growth to economic growth for Finland, France, Portugal, and Sweden, one-way Granger causality running from economic growth to population growth for Canada, Germany, Japan, Norway and Switzerland, and no causal relationship between population growth and economic growth is found in Belgium, Brazil, Denmark, Netherlands, New Zealand, Spain, Sri Lanka, the UK, the USA and Uruguay. Furthermore, we found feedback between population growth and economic growth for Austria and Italy. Dividing the sample into two subsamples due to a structural break yielded different results in that for the first period of 1871-1951 we found that population growth Granger cause economic growth only for Finland and France, economic growth Granger cause population growth for Denmark, Japan, and Norway and that there is bidirectional causality between population growth and economic growth for both Austria and Italy. For the period of 1952-2013 we found that population growth Granger cause economic growth only for Sri Lanka, economic growth Granger cause population growth for Belgium, Denmark, France, Germany, New Zealand, Spain, Switzerland, and Uruguay and that found bidirectional causality between population growth and economic growth only for Japan. Our empirical results have important policy implications for these 21 countries under study as the directions of causality tend to differ across countries and depending on the time period under question.
    Keywords: Population Growth, Economic Growth, Dependency and Heterogeneity, Bootstrap Panel Causality Test
    JEL: C32 C33 O40 Q56
    Date: 2014–06
  14. By: Jellal, Mohamed
    Abstract: We integrate a general social norm function which associates status to accumulation of capital and consumption into a very simple model of endogenous growth. We show that societies which place a greater cultural weight on capital as opposed to consumption preferences will experience fast growth. Our results are consistent with those obtained by Baumol(1990) in the context of entrepreneurship and by Fershtman and Weiss (1991).
    Keywords: Cultural incentives, social status, endogenous growth
    JEL: A13 O1 O43 Z13
    Date: 2014–07–04
  15. By: Rahul Anand; Volodymyr Tulin; Naresh Kumar
    Abstract: We document the evolution of poverty and inequality across Indian states during the recent period of rapid growth (2004-09), and examine the role of growth and distribution in reducing poverty. Robust economic growth has been a major driver of poverty reduction and inclusiveness in India. We explore the role of economic policies and macrofinancial conditions in explaining inclusive growth and its components, using a new measure of inclusive growth. Social expenditures, spending on education, and educational attainment rates are important for fostering inclusive growth. Macro-financial stability, with particular attention to inflation risks, is also criticial for promoting inclusive growth.
    Keywords: Economic growth;India;Income distribution;Poverty reduction;India, state level growth, poverty, inequality, inclusive growth
    Date: 2014–04–16
  16. By: Abdul Farooq; Muhammad Shahbaz; Mohamed Arouri; Frédéric Teulon
    Abstract: The present study reinvestigates the impact of corruption on economic growth by incorporating financial development and trade openness in growth model in case of Pakistan.We have used time series data over the period of 1987–2009. We have applied s
    Keywords: Corruption, Growth, Pakistan.
    Date: 2014–06–23
  17. By: Amavilah, Voxi Heinrich
    Abstract: This comment is not a typical outcome of a typical research activity, and it not written like one. For example, although I have a list of references, I do not provide a formal literature review. The list is simply an acknowledge of the work that might have influenced my thoughts on the topic at hand. It is also not a review or any other evaluation of Lewis’s work, of which there are many by more eminent and famous friends, colleagues, and students of his. Lewis’s impact on Development Economics is well-known and appreciated. Less known and openly appreciated is his economic theory of growth and technological change, but I am not going to stress that either. My maintained claim is that the Newly-Industrialized Asian economies (NIAEs) have read carefully and followed closely and well Lewis’s theory in devising their growth and change strategies and policies, with local adjustments, of course. Many African countries on the other hand appear to have followed Lewis halfheartedly and in a helter-skelter way. Consequently, the difference in the performance of the two regions is no longer a matter of contention. The objective of this comment is to restate what I believe are Lewis’s key lessons to developing countries, and to show that although Lewis led all developing countries to water, proverbially speaking, some African countries have so far chosen not to drink. I find that there is a deliberateness in the order of the development process as conceptualized in Lewis’s theory of economic growth and technological change. First, for a country to grow it has to acknowledge that scarcity is real and to learn to be efficient, to economize. Second, efficiency requires good economic institutions to sustain it. Third, institutions need to not only have knowledge, defined as technological knowledge plus social knowledge, but more importantly such knowledge must grow, spread, and be used. The fourth “proximate cause” of growth in this order of preference is physical capital. Following capital, in the fifth and sixth places, respectively, are population (labor) and other natural resources (land), and government. Lewis is new classical (not to be confused with neo-classical) in that his theory of growth and change takes population and natural resources as given for any developing country, and counts government as a throwback to classical economics to suggest that economies perform best when government’s role is well defined and constrained. By implication good government is a function of good institutions, learning and knowledge growth. I conclude from this evidence that some African countries have refused to acknowledge scarcity, paid lip-service to knowledge accumulation, growth, and diffusion, over-stressed their need for physical capital and the abundance of their natural resources, neglected their populations, and failed to assign government its proper role. The result, until recently, has been slow growth.
    Keywords: Economic growth and technological change, Lewis and the Africans, Lewis and growth and change of African countries, lessons for growth and change, deep causes of growth and change of developing countries
    JEL: O11 O33 O47 O55 P52
    Date: 2014–07–05
  18. By: Corrado, Carol (The Conference Board); Haskel, Jonathan (Imperial College London); Jona-Lasinio, Cecilia (ISTAT, Rome)
    Abstract: This paper looks at the channels through which intangible assets affect productivity. The econometric analysis exploits a new dataset on intangible investment (INTAN-Invest) in conjunction with EUKLEMS productivity estimates for 10 EU member states from 1998 to 2007. We find that (a) the marginal impact of ICT capital is higher when it is complemented with intangible capital, and (b) non-R&D intangible capital has a higher estimated output elasticity than its conventionally-calculated factor share. These findings suggest investments in knowledge-based capital, i.e., intangible capital, produce productivity growth spillovers via mechanisms beyond those previously established for R&D.
    Keywords: productivity growth, economic growth, intangible capital, intangible assets, ICT, spillovers
    JEL: O47 E22 E01
    Date: 2014–06
  19. By: Golub, Alexander; Toman, Michael
    Abstract: This paper examines the possibility of environmental"development traps,"or"brown poverty traps,"caused by interactions between the impacts of climate change and increasing returns in the development of"clean-technology"sectors. A simple specification is used in which the economy can produce a single homogeneous consumption good with two different technologies. In the"old"sector, technology has global diminishing returns to scale and depends on the use of fossil energy that gives rise to long-lived, damaging climate change. In the"new"sector, the technology has convex-concave production and is not dependent on the polluting energy input. If the new sector does not grow fast enough to move through the phase of increasing returns, then the economy may linger at a low level of income indefinitely or it may achieve greater progress but then get driven back down to a lower level of income by environmental degradation. Stimulating growth in the new sector thus may be a key element for avoiding an environmental poverty trap and achieving higher, sustained income levels.
    Keywords: Environmental Economics&Policies,Economic Theory&Research,Climate Change Mitigation and Green House Gases,Climate Change Economics,Economic Growth
    Date: 2014–06–01
  20. By: van der Weide, Roy; Milanovic, Branko
    Abstract: The paper assesses the impact of overall inequality, as well as inequality among the poor and among the rich, on the growth rates along various percentiles of the income distribution. The analysis uses micro-census data from U.S. states covering the period from 1960 to 2010. The paper finds evidence that high levels of inequality reduce the income growth of the poor and, if anything, help the growth of the rich. When inequality is deconstructed into bottom and top inequality, the analysis finds that it is mostly top inequality that is holding back growth at the bottom.
    Keywords: Inequality,Achieving Shared Growth,Poverty Impact Evaluation,Services&Transfers to Poor,Equity and Development
    Date: 2014–07–01
  21. By: Saad A. Alshahrani; Ali J. Alsadiq
    Abstract: This paper empirically examines the effects of different types of government expenditures, on economic growth in Saudi Arabia. We use different econometric techniques to estimate the short- and long-run effects of these expenditures on growth and employ annual data over the period 1969-2010. Our findings indicate that while private domestic and public investments, as well as healthcare expenditure, stimulate growth in the long-run, openness to trade and spending in the housing sector can also boost short-run production. These findings draw some policy implications for Saudi policymakers on maximizing the returns of the government spending on economic growth.
    Keywords: Economic growth;Saudi Arabia;Government expenditures;Fiscal policy;Time series;Economic models;Government Spending, Oil Exporting Economy, total expenditures, capital expenditures, defense expenditures, health expenditures, education expenditures, public expenditures, expenditure growth, expenditure categories, consumption expenditure, composition of government spending, medium-term expenditure, medium-term expenditure framework, fiscal affairs, taxation, capital expenditure growth, public spending, government consumption expenditure, fiscal affairs department
    Date: 2014–01–13

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