nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒08‒02
nineteen papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. "State History and Economic Development: Evidence from Six Millennia" By Oana Borcan; Ola Olsson; Louis Putterman
  2. Human Capital Formation from Occupations: The ‘Deskilling Hypothesis’ Revisited By Alexandra De Pleijt; Jacob Weisdorf
  3. Fertility and early-life mortality: Evidence from smallpox vaccination in Sweden By Ager, Philipp; Worm Hansen, Casper; Sandholt Jensen, Peter
  4. Before she said ‘I do’ The impact of industrialization on unmarried women’s labour force participation 1812-1932 By Corinne Boter
  5. Growth, Import Dependence and War By Roberto Bonfatti; Kevin Hjortshøj O'Rourke
  6. Guns, Economic Growth and Education during the second half of the Twentieth Century: Was Spain different? By José Jurado-Sánchez; Juan-Ángel Jiménez-Martín
  7. Entry, Exit and Economic Growth: US Regional Evidence By Miguel Casares; Hashmat U. Khan
  8. Risk Aversion in a Model of Endogenous Growth By Christian Chiglino; Nicole Tabasso
  9. Cognitive capital, governance, and the wealth of nations By Kodila-Tedika, Oasis; Rindermann, Heiner; Christainsen, Gregory
  10. A Colonial Legacy of African Gender Inequality? Evidence from Christian Kampala, 1895-2011 By Felix Meier zu Selhausen; Jacob Weisdorf
  11. A latent democracy measure 1850-2000 By Peter Foldvari
  12. Obedience and Income Levels By Joshua C. Hall; Kaitlyn R. Harger
  13. Can service be a growth escalator in low-income countries ? By Ghani, Ejaz; O'Connell, Stephen D.
  14. Re-Visiting Financial Development and Economic Growth Nexus: The Role of Capitalization in Bangladesh By Shahbaz, Muhammad; Rehman, Ijaz ur; Ahmed Taneem, Muzaffar
  15. Catching up and lagging behind in a balance-of-payments-constrained dual economy By Lavopa A.
  16. An unfinished business: Economic liberalization and structural change in Mexico By Padilla-Pérez, Ramón; Villarreal, Francisco G.
  17. A Theorem on the Limit-Properties of Structural Change and some Implications By Stijepic, Denis
  18. Do balanced-budget rules increase growth? By Stone, Joe
  19. Green Jobs and Growth in the United States: Green Shoots or False Dawn? By Robert J R Elliott; Joanne K Lindley

  1. By: Oana Borcan; Ola Olsson; Louis Putterman
    Abstract: All since the rise of the first civilizations, economic development has been closely intertwined with the evolution of states. In this paper, we contribute to the literature on state history and long-run economic development in four ways. First, we extend and complete the state history index from Bockstette, Chanda and Putterman (2002) by coding the experience with states from the first state origins, 3500 BCE, up until 2000 CE. Second, we explore empirically the relationship between time since transition to agriculture and state age, as well as subsequent state history. Our estimated unconditional correlation implies that a 1000 year earlier transition to agriculture is associated with a 470 years earlier emergence of state institutions. We show how this relationship differs between indigenously- and externally- originated states. Third, we show that the relationship between our extended state history index and current levels of economic development has the shape of an inverted u. The results reflect the fact that countries that were home to the oldest states, such as Iraq, Egypt and China, are poorer today than younger inheritors of their civilizations, such as Germany, Denmark and Japan. This pattern was already in place by 1500 CE and is robust to adjusting for migrations during the colonial era. Finally, we demonstrate a very close relationship between state formation and the adoption of writing.
    Keywords: State history, comparative development
    Date: 2014
  2. By: Alexandra De Pleijt; Jacob Weisdorf
    Abstract: We use occupational titles from English parish registers in an attempt to test the deskilling hypothesis, i.e. the notion that England’s Industrial Revolution was mainly skill saving. We code the occupational titles of over 30,000 male workers according to the skillcontent of their work (using HISCLASS) to track the evolution of working skills in England between 1550 and 1850. Although we observe a minor rise in the share of ‘high-quality workmen’ deemed necessary by Mokyr and others to facilitate the Industrial Revolution, such as joiners, turners, and wrights, we also find considerable growth in the share of unskilled workers, from 20% in around 1700 to 39% in around 1850, fed mainly by falling shares of semi-skilled blue-collar workers, such as tailors, shoemakers, and weavers. This supports the view that England’s Industrial Revolution was not only skill saving on average but also involved a proletarianization of the English workforce.
    Keywords: Deskilling, HISCLASS, Human Capital, Industrial Revolution, Occupations
    Date: 2014–07
  3. By: Ager, Philipp; Worm Hansen, Casper; Sandholt Jensen, Peter
    Abstract: We examine how the introduction of smallpox vaccination affected early-life mortality and fertility in Sweden during the first half of the 19th century. We demonstrate that parishes in counties with higher levels of smallpox mortality prior to the introduction of vaccination experienced a greater decline in infant mortality afterwards. Exploiting this finding in an instrumental-variable approach reveals that this decline had a negative effect on the birth rate, while the number of surviving children and population growth remained unaffected. These results suggest that the decline in early-life mortality cannot account for the onset of the fertility decline in Sweden.
    Keywords: Fertility transition, infant mortality, smallpox vaccine
    JEL: I15 J10 J13 N33
    Date: 2014–07–29
  4. By: Corinne Boter
    Abstract: Recent research based on Dutch marriage records shows a steady decrease of female labour force participation from the 1840s until the 1930s. However, this research relies on combined data from several municipalities. Analysing the sources in this way aggregates the development to such an extent that local variation is completely overlooked. This article contributes to our understanding of regional variation in unmarried women’s labour from 1812 to 1932. The purpose of this research is to isolate the developments in industry from those in agriculture and the service sector. I use marriage records from four regions that list the occupation of the bride to determine the amount of working unmarried women throughout the research period. My data show a different development from the previously mentioned research. Unlike earlier results, I found that unmarried women’s labour force participation in the industrial centres did not decrease gradually throughout the nineteenth and early-twentieth century. Moreover, labour force participation was remarkably high compared to the other sectors, especially during the first decades of the twentieth century. I argue that industry developed in a specific way because it required a cheap labour force which was mostly found among young women. This statement is supported by showing the percentages of brides with a recorded occupation in two industrial centres. Furthermore, I show that in these centres, the younger a woman was, the higher the chance that she stated an occupation in her marriage record. This was not the case in the agricultural and serviceoriented regions I have investigated. I therefore argue that research on the history of female labour should be approached from a comparative perspective for a proper understanding of its developments.
    Keywords: female labour force participation, unmarried women, industrialization, marriage records
    Date: 2014–07
  5. By: Roberto Bonfatti; Kevin Hjortshøj O'Rourke
    Abstract: Existing theories of pre-emptive war typically predict that the leading country may choose to launch a war on a follower who is catching up, since the follower cannot credibly commit to not use their increased power in the future. But it was Japan who launched a war against the West in 1941, not the West that pre-emptively attacked Japan. Similarly, many have argued that trade makes war less likely, yet World War I erupted at a time of unprecedented globalization. This paper develops a theoretical model of the relationship between trade and war which can help to explain both these observations. Dependence on strategic imports can lead follower nations to launch pre-emptive wars when they are potentially subject to blockade.
    JEL: F51 F52 N70
    Date: 2014–07
  6. By: José Jurado-Sánchez (Department of Economic History and Institutions I, Complutense University of Madrid); Juan-Ángel Jiménez-Martín (Departamento de Economía Cuantitativa (Department of Quantitative Economics), Facultad de Ciencias Económicas y Empresariales (Faculty of Economics and Business), Universidad Complutense de Madrid)
    Abstract: In the past decades, numerous studies have been conducted on the trade-off between guns and butter, namely defense versus social sector expenditure. The aim of this research is identifying whether indeed defense spending crowded out investment and other social expenditures as health and education. Previous research does not yield strong and unambiguous evidence of neither positive nor negative effects of military expenditure on social spending. It is striking that the guns versus butter dilemma has not been extensively studied for Spain. Using Mintz and Huang (1991) strategy applied to the US, we test if the government expenditure in defense in Spain during the last part of the Franco’s dictatorship and the first years of the transition and democracy, contributed positively or negatively to education spending. Results show a negative trade-off for the Franco’s regimen and an ambiguous effect for the last part of the sample.
    Keywords: Guns versus butter dilemma.
    JEL: H51 H52 H53 H56 N40 N44
    Date: 2014–06
  7. By: Miguel Casares (Universidad Pública de Navarra University); Hashmat U. Khan (Department of Economics, Carleton University)
    Abstract: Entry rates have a negative long-run effect on US regional growth, which contradicts innovation-based growth models. This puzzle is resolved when a model-consistent specification is estimated using per capita entry growth. Evidence supports the Schumpeterian hypothesis of a positive relationship between exit and economic growth.
    Keywords: Entry-exit rates; Per capita entry-exit growth; Economic growth
    JEL: O30 O40 O51
    Date: 2014–07–15
  8. By: Christian Chiglino (University of Essex); Nicole Tabasso (University of Surrey)
    Abstract: Despite the evidence on incomplete financial markets and substantial risk being borne by innovators, current models of growth through creative destruction predominantly model innovators as risk neutral. Risk aversion is expected to reduce the incentive to innovate and we might fear that without insurance innovation completely disappears in the long run. The present paper introduces risk averse agents into an occupational choice model of endogenous growth in which insurance against failure to innovate is not available. We derive a clear negative relationship between the level of risk aversion and long run growth. Surprisingly, we show that in an equilibrium there exists a cut-off value of risk aversion below which the growth rate of the mass of innovators tends to a strictly positive constant. In this case, innovation persists on the long run and consumption per capita grows at a strictly positive rate. On the other hand, for levels of risk aversion above the cut-off of value, the economy eventually stagnates.
    JEL: O40 O41 O43
    Date: 2014–07
  9. By: Kodila-Tedika, Oasis; Rindermann, Heiner; Christainsen, Gregory
    Abstract: Good governance or “government effectiveness” (per the World Bank) is seen as a critical factor for the wealth of nations insofar as it shapes political and economic institutions and affects overall economic performance. The quality of governance, in turn, depends on the attributes of the people involved. In an analysis based on international data, government effectiveness was related to the cognitive human capital of the society as a whole, of the intellectual class, and of leading politicians. The importance of cognitive capital was reflected in the rate of innovation, the degree of economic freedom, and country competitiveness, all of which were found to have an impact on the level of productivity (GDP per capita) and wealth (per adult). Correlation, regression, and path analyses involving N=98 to 201 countries showed that government effectiveness had a very strong impact on productivity and wealth (total standardized effects of =.56-.68). The intellectual class’s cognitive competence, seen as background factor and indicated by scores for the top 5 percent of the population on PISA, TIMSS and PIRLS, also had a strong impact (=.50-.54). Cross-lagged panel designs were used to establish causal directions, including backward effects from economic freedom and wealth on governance. The use of further controls showed no independent impacts on per capita wealth coming from geographical variables or natural resource rents. Finally, we discuss background factors and ways in which governance might be improved.
    Keywords: government effectiveness, human capital, cognitive ability, intelligence, economic freedom, innovation, competitiveness
    JEL: D73 I2 I20 O43 O55
    Date: 2014–07–25
  10. By: Felix Meier zu Selhausen; Jacob Weisdorf
    Abstract: The colonial legacy of African underdevelopment is widely debated but hard to document. We use occupational statistics from Protestant marriage registers of historical Kampala to investigate the hypothesis that African gender inequality and female disempowerment are rooted in colonial times. We find that the arrival of Europeans in Uganda ignited a century- long transformation of Kampala involving a gender Kuznets curve. Men rapidly acquired literacy and quickly found their way into white-collar (high-status) employment in the wage economy built by the Europeans. Women took somewhat longer to obtain literacy and considerably longer to enter into white-collar and waged work. This led to increased gender inequality during the first half of the colonial period. But gender inequality gradually declined during the latter half of the colonial era, and after Uganda’s independence in 1962 its level was not significantly different from that of pre-colonial times. Our data support Boserup’s view that gender inequality was rooted in native social norms: daughters of African men who worked in the traditional, informal economy were less well educated, less frequently employed in formal work, and more often subjected to marital gender inequality than daughters of men employed in the modernized, formal economy created by the Europeans.
    Keywords: Africa, Church Books, Colonialism, Development, Female Disempowerment, Gender Discrimination, Gender Inequality, Missionaries, Uganda
    Date: 2014–07
  11. By: Peter Foldvari
    Abstract: In this paper we apply a factor analysis with a measurement error model to extract the latent democracy variable from the components of polity2 and Vanhanen’s Index of Democracy, under the assumption that each of these components are driven by a common latent factor with different amount of measurement errors. We use the estimated latent democracy variable to estimate the distribution of democracy across countries over the 1860- 2000 period.
    Keywords: latent variable estimation, democracy, factor analysis
    Date: 2014–07
  12. By: Joshua C. Hall (West Virginia University, College of Business and Economics); Kaitlyn R. Harger (West Virginia University, College of Business and Economics)
    Abstract: We revisit the relationship between informal institutions and income levels. The empirical literature on institutions finds that indices of "informal institutions" such as trust, respect, respect, self-determination, and obedience are more important than "formal institutions" such as constitutional constraints in explaining income levels across countries. We add to this literature in two ways. First, we separate out the index of informal institutions into its component parts to see which informal institutions are primary. Second, we construct two new measures of obedience to test the robustness of obedience. Our reduced-form results indicate the primacy of obedience over other informal institutions.
    Keywords: informal institutions, formal institutions, culture, economic development
    JEL: O13 O17
    Date: 2014
  13. By: Ghani, Ejaz; O'Connell, Stephen D.
    Abstract: Several high-level reports have raised the concern that low-income countries, especially in Africa, are experiencing premature de-industrialization. The concern is that they are growing without transforming. Have the latecomers to development missed the boat? Although these concerns are well placed, Africa's growth seems to be benefitting from a structural transformation of a different kind. The manufacturing sector as a share of gross domestic product has shrunk, but countries have benefitted from the third industrial revolution with globalization of services being at the forefront of this technological revolution. As services produced and traded across the world expand with globalization, the possibilities for low-income countries to develop based on their comparative advantage expand. That comparative advantage can just as easily be in services as in manufacturing. Comparative advantage need not be a one-trick pony.
    Keywords: Economic Theory&Research,Banks&Banking Reform,Achieving Shared Growth,Labor Policies,E-Business
    Date: 2014–07–01
  14. By: Shahbaz, Muhammad; Rehman, Ijaz ur; Ahmed Taneem, Muzaffar
    Abstract: This paper revisits the relationship between financial development and economic growth in Bangladesh by incorporating trade openness in production function using quarter frequency data over the period of 1976-2012. We applied combined Bayer-Hanck cointegration to examine cointegration amongst variables in the presence of structural breaks. The results show that financial development facilitates economic growth but capitalization impedes it. In addition, trade openness stimulates economic growth. Labour is also positively linked with economic growth. The causality analysis reveals the feedback effect between financial development and economic growth. Trade and labour Granger cause economic growth. This paper provides new insights for policy making authorities to use financial development and trade openness as tool to sustain economic growth in long run. This paper also suggests policy makers to utilise capitalization in proper way to sustain economic growth for long run.
    Keywords: Financial development, trade openness, Bangladesh
    JEL: C1
    Date: 2014–07–15
  15. By: Lavopa A. (UNU-MERIT)
    Abstract: The success of nations in the path towards economic development hinges heavily on the emergence and dynamism of a modern sector capable of simultaneously absorbing an increasing share of the labour force while reducing the technological gap with the worlds frontier. Failure to do so would eventually lead the economy to low- or middle- income traps, in which only a small fraction of the population would benefit from the gains of economic growth and technological progress. Building on previous contributions from Post-Keynesian, Neo-Schumpeterian and Latin-American Structuralism literature, this paper sets up a theoretical model of catching-up among nations aimed at formalizing this idea by exploring the dynamic interactions between structural change and technological upgrading in the process of economic development. The focus of the model is on a representative nation of the South that is characterized by having i a dual structure i.e., a large share of labour force working on low-productive-traditional activities that coexists with a small fraction of workers employed in modern activities; ii a high degree of technological backwardness in the modern activities; and iii a binding restriction on the external accounts. Under these circumstances, the dynamic behaviour of two key variables will determine the success or failure of this economy over time the share of labour in the modern sector and the relative stock of technological knowledge of the modern sector compared to that of the world technological leader. Depending on initial conditions and underlying parameters, the southern economy would be attracted towards four different equilibrium points, each of them entailing extremely different implications in terms of long-run development. After analysing the dynamic properties of the model, simple simulations are implemented in order to illustrate a number of structural trajectories that might shed new light on the complex forces acting behind the success or failure of economic development.
    Keywords: Economic Growth of Open Economies; Macroeconomic Analyses of Economic Development; Technological Change: Choices and Consequences; Diffusion Processes; One, Two, and Multisector Growth Models;
    JEL: O11 O33 O41 F43
    Date: 2014
  16. By: Padilla-Pérez, Ramón; Villarreal, Francisco G.
    Abstract: Mexico, as other Latin American countries, undertook far-reaching economic reforms in the 1980s and 1990s in a wide array of areas: trade and industrial policy, foreign investment and capital account, privatization of public enterprises and deregulation of economic activities, among others. As a result of the new economic model, the Mexican economy experienced outstanding export growth, successful insertion into international dynamic markets and shift towards medium and high-technology industries. Yet productivity growth has been insufficient, leading to low and volatile economic growth. This paper examines the dynamics of productivity growth and in particular analyzes whether inter- and intra-industry dynamics can account for sluggish productivity growth. It makes use of a shift-share analysis, taking advantage of a recently published industry-level database developed by the Mexican National Statistics Office as part of the LA-KLEMS project. The paper shows that Mexico has experienced an unfinished structural change, where productivity growth within sectors has been insufficient to close the gap with its main trading partner, the United States. Moreover, despite a significant reallocation of hours worked across industries, its aggregate impact has been hampered by the fact that flows have been from industrial sectors with high labor productivity growth towards sectors with lower, or contracting, productivity growth.
    Keywords: Structural Change, Growth, Aggregate Productivity
    JEL: N16 O11 O47
    Date: 2014–07–25
  17. By: Stijepic, Denis
    Abstract: Recent growth literature studies structural change in relatively specific three-sector growth models with a focus on the agriculture-manufacturing-services structure. In this paper we take another approach for studying this structural change. By using only few axioms on the properties of structural change trajectories and some mathematical theorems on the limit-properties of trajectories in the plane, we show that structural change in a three-sector framework is a relatively simple process: it is either transitory or cyclical unless there are some “exogenous” driving forces. We elaborate the implications of this result for the structural change modelling literature and topics for further research.
    Keywords: structure; dynamics; differential equation systems; limit; Poincaré-Bendixon-theory
    JEL: C61 O41
    Date: 2014–06–25
  18. By: Stone, Joe
    Abstract: This study tests the hypothesis that balanced-budget rules (BBRs) that restrict public borrowing to investments in public infrastructure increase growth by increasing the productivity of debt, either because investments in public infrastructure are more productive than other uses for which states borrow funds or because BBRs lower borrowing costs. Results are based on data at 5-year intervals for 49 US states over the period 1957-2007. The tests strongly support the hypothesis that BBRs increase growth by increasing the productivity of debt and withstand a variety of robustness checks, including alternative lags, exogeneity tests, GMM estimation, a placebo test, and the influence of outliers.
    Keywords: balanced budget rule, infrastructure, fiscal policy, regional growth
    JEL: A1 E6 H2 R1
    Date: 2014–07–20
  19. By: Robert J R Elliott; Joanne K Lindley
    Abstract: Green growth is increasingly being seen as a means of simultaneously meeting current and future climate change obligations and reducing unemployment. This paper uses detailed industry-level data from the Bureau of Labor Statistic's Green Goods and Services survey to examine how the provision of green goods and services has affected various aspects of the US economy. Our descriptive results reveal that those states and industries that were relatively green in 2010 became even greener in 2011. To investigate further we include green goods and services in a production function. The results show that between 2010 and 2011 industries that have increased their share of green employment have reduced their productivity although this negative correlation with productivity was only for the production of green goods and not for the supply of green services. In further analysis we investigate skill-technology complementarities in the production of green goods and services and show that industries that increased their provision of green goods and services grew more slowly, reduced their expenditure on technology inputs and increased their demand for medium educated workers, whilst simultaneously reducing their demand for low skilled workers.
    Keywords: Green Goods and Services; Productivity; Employment
    JEL: Q4 Q3
    Date: 2014–07

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