nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒08‒16
twenty-one papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. Growth, Import Dependence and War By Kevin Hjortshøj O'Rourke; Roberto Bonfatti
  2. Competition as a Discovery Procedure: Schumpeter Meets Hayek in a Model of Innovation By Pedro Bento
  3. Land Accumulation Dynamics in Developing Country Agriculture By Heath Henderson; Leonardo Corral; Eric Simning; Paul Winters
  4. Parenting with Style: Altruism and Paternalism in Intergenerational Preference Transmission By Matthias Doepke; Fabrizio Zilibotti
  5. Multiple Interior Steady States in the Ramsey Model with Elastic Labor Supply By Takashi Kamihigashi
  6. The Poor, the Prosperous and the ?Inbetweeners?: A Fresh Perspective on Global Society, Inequality and Growth By Peter Edward; Andy Sumner
  7. Intergenerational Transfers and the Fertility-Income Relationship By Cordoba, Juan Carlos; Ripoll, Marla
  8. Fertility Decline and Missing Women By Seema Jayachandran
  9. The sex differential in mortality: a historical comparison of the adult-age pattern of the ratio and the difference By Oliver Wisser; James W. Vaupel
  10. The Quiet Revolution and the Family: Gender Composition of Tertiary Education and Early Fertility Patterns By Alena Bičáková; Štěpán Jurajda
  11. "The Biocultural Origins of Human Capital Formation" By Oded Galor; Marc Klemp
  12. Being Healthy, Wealthy, and Wise: Dynamics of Indonesian Subnational Growth and Poverty. By Sumarto, Sudarno; De Silva, Indunil
  13. The Nexus Between Financial Development and Economic Growth in Laos By Phouphet KYOPHILAVONG; Gazi Salah Uddin; Muhammad Shahbaz
  14. A Theory of Average Growth Rate Indices By Alexander Alexeev; Mikhail Sokolov
  15. Foreign aid effectiveness in African economies: Evidence from a panel threshold framework By Alia, Didier Yelognisse; Anago, Romuald E. Kouadio
  16. Climate change and economic growth prospects for Malawi: An uncertainty approach By Arndt, Channing; Schlosser, Adam; Strzepek, Kenneth
  17. Electricity Consumption, Inflation, and Economic Growth in Nigeria: A Dynamic Causality Test By Njindan Iyke, Bernard
  18. Patent Protection as a Tax on Competition and Innovation By Pedro Bento
  19. Economic Growth and Jobs Creation in Morocco: Overall and Sectors’ Analysis By Ezzahidi, Elhadj; El Alaoui, Aicha
  20. Economic System and Transition Mode : A Comparative Research on Transition Economies By Yang, Liu
  21. A Model of Technology Assimilation By Chong-Kee Yip; Tsz-Nga Wong

  1. By: Kevin Hjortshøj O'Rourke; Roberto Bonfatti
    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.
    Date: 2014–07–25
  2. By: Pedro Bento (West Virginia University, College of Business and Economics)
    Abstract: I incorporate an insight of Friedrich Hayek - that competition allows a thousand flowers to bloom, and discovers the best among them - into a model of Schumpeterian innovation. Firms face uncertainty about the optimal direction of innovation, so more innovations implies a higher expected value of the `best' innovation. The model accounts for two seemingly contradictory relationships reported in recent empirical studies - a positive relationship between competition and industry-level productivity growth, and an inverted-U relationship between competition and firm-level innovation. Notwithstanding the positive relationship between competition and growth, I find antitrust policy reduces industry-level growth.
    Keywords: competition, innovation, productivity growth, inverted-u, antitrust, regulation
    JEL: O31 O40 L41 L51
    Date: 2013–08
  3. By: Heath Henderson; Leonardo Corral; Eric Simning; Paul Winters
    Abstract: Understanding land accumulation dynamics is relevant for policy makers interested in the economic effects of land inequality in developing country agriculture. We thus explore and simultaneously test the leading theories of microlevel land accumulation dynamics using unique panel data from Paraguay. The results suggest that farm growth varies systematically with farm size --a formal rejection of stochasticgrowth theories (that is, Gibrat's Law)-- and that titled land area may have considerable infuence on land accumulation. Furthermore, our estimates indicate that a dualistic agrarian structure is the likely product of the unfettered operation of land markets.
    Keywords: Land titling, Land tenure, Agricultural policy, Farm growth, Land accumulation, Dynamic panel models, Land inequality, Paraguay
    Date: 2014–07
  4. By: Matthias Doepke; Fabrizio Zilibotti
    Abstract: We develop a theory of intergenerational transmission of preferences that rationalizes the choice between alternative parenting styles (as set out in Baumrind 1967). Parents maximize an objective function that combines Beckerian altruism and paternalism towards children. They can affect their children's choices via two channels: either by influencing children's preferences or by imposing direct restrictions on their choice sets. Different parenting styles (authoritarian, authoritative, and permissive) emerge as equilibrium outcomes, and are affected both by parental preferences and by the socioeconomic environment. Parenting style, in turn, feeds back into the children's welfare and economic success. The theory is consistent with the decline of authoritarian parenting observed in industrialized countries, and with the greater prevalence of more permissive parenting in countries characterized by low inequality.
    JEL: D10 J10 O10 O40
    Date: 2014–06
  5. By: Takashi Kamihigashi (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: In this paper we show that multiple interior steady states are possible in the Ramsey model with elastic labor supply. In particular we establish the following three results: (i) for any discount factor and production function, there is a utility function such that a continuum of interior steady states exist; (ii) the number of interior steady states can also be any finite number; and (iii) for any discount factor and production function, there is a utility function such that there is no interior steady state. Some numerical examples are provided.
    Keywords: Multiple steady states, Ramsey model, Elastic labor supply, Neoclassical growth
    JEL: C61 C62 E13 O41
    Date: 2014–07
  6. By: Peter Edward (Newcastle Universtiy Business School); Andy Sumner (Institute of Development Studies, Sussex)
    Abstract: What has happened to inequality between and within countries since 1990? In this paper we explore who have been the winners and losers from global growth since 1990. We find that falls in total global inequality in the last 30 years are predominantly attributable to rising prosperity in China. We also identify a persistent global structure of two relatively homogeneous clusters (the poor/insecure and secure/prosperous). We detect the emergence of a ?new global middle? but question whether this implies the end of the historical two-cluster world rather than merely a transition as some people move from the poor/insecure cluster into the secure/prosperous cluster. Nevertheless, we do identify five different stylised patterns of national growth: pro-poor growth (e.g. Ethiopia); pro-middle growth (e.g. Brazil); anti-poor growth (e.g. Nigeria); anti-middle growth (e.g. Zambia) and equitable growth (e.g. Vietnam). We also find that 15 per cent of growth from 1990 to 2010 went to the world?s richest 1 per cent, while just a modest amount of redistribution would have ended $2 poverty. If the share of global growth between 1990 and 2010 flowing to those who were living on under $2/day in 2010 had increased from 5 per cent to just 12 per cent, this would have been sufficient to end $2 poverty today. Persistence of global poverty, it seems, is not due to insufficient global growth but to a reluctance among the secure/prosperous cluster to forego a small share of their benefits from global growth in favour of fairly modest redistribution to the global poor.(?)
    Keywords: The Poor, the Prosperous and the ?Inbetweeners?: A Fresh Perspective on Global Society, Inequality and Growth
    Date: 2014–03
  7. By: Cordoba, Juan Carlos; Ripoll, Marla
    Abstract: �Extensive evidence from cross-sectional data reveals a robust negative relationship betweenfamily income and fertility. This paper argues that constraints to intergenerational transfersare crucial for understanding this relationship. If parents could legally impose debt obligationson their children as a way to recover the costs incurred in raising them, then fertility wouldbe independent of parental income. In this case, if the present value of a childÂ’s future incomeexceeds the cost of raising the child, as the evidence suggests is the case, parents would haveincentives to raise as many children as possible in order to maximize rents. A relationshipbetween fertility and income arises when parents are unable to leave debts behind either becauseof legal, enforcement, or moral constraints. We also derive the conditions under which thefertility-income relationship is negative. Notably, an intergenerational elasticity of substitutionlarger than one is required. In this case, parental consumption is a good substitute for childrenÂ’sconsumption making it optimal for income rich parents to have fewer children.Extensive evidence from cross-sectional data reveals a robust negative relationship between�family income and fertility. This paper argues that constraints to intergenerational transfers�are crucial for understanding this relationship. If parents could legally impose debt obligations�on their children as a way to recover the costs incurred in raising them, then fertility would�be independent of parental income. In this case, if the present value of a childÂ’s future income�exceeds the cost of raising the child, as the evidence suggests is the case, parents would have�incentives to raise as many children as possible in order to maximize rents. A relationship�between fertility and income arises when parents are unable to leave debts behind either because�of legal, enforcement, or moral constraints. We also derive the conditions under which the�fertility-income relationship is negative. Notably, an intergenerational elasticity of substitution�larger than one is required. In this case, parental consumption is a good substitute for childrenÂ’s�consumption making it optimal for income rich parents to have fewer children.�
    Keywords: Fertility; credit frictions; parental altruism; bequest constraints; elasticity of intertem-poral substitution
    JEL: D10 D64 D91 J1
    Date: 2014–06–05
  8. By: Seema Jayachandran
    Abstract: India's male-biased sex ratio has worsened over the past several decades. In combination with the increased availability of prenatal sex-diagnostic technology, the declining fertility rate is a hypothesized factor. Suppose a couple strongly wants to have at least one son. At the natural sex ratio, they are less likely to have a son the fewer children they have, so a smaller desired family size will increase the likelihood they manipulate the sex composition of their children. This paper empirically measures the relationship between desired fertility and the sex ratio. Standard survey questions on fertility preferences ask the respondent her desired number of children of each sex, but people who want larger families have systematically stronger son preference, which generates bias. This paper instead elicits desired sex composition at specified, randomly determined, levels of total fertility. These data allow one to isolate the causal effect of family size on the desired sex ratio. I find that the desired sex ratio increases sharply as the fertility rate falls; fertility decline can explain roughly half of the increase in the sex ratio that has occurred in India over the past thirty years. In addition, factors such as female education that lead to more progressive attitudes could counterintuitively cause a more male-skewed sex ratio because while they reduce the desired sex ratio at any given family size, they also reduce desired family size.
    JEL: J13 O12 O15
    Date: 2014–07
  9. By: Oliver Wisser (Max Planck Institute for Demographic Research, Rostock, Germany); James W. Vaupel (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: The ratio (RMR) is the standard measure of sex differentials in mortality. It is commonly known that the RMR was historically small and increased throughout the 20th century. However, numerical properties might account for the trend in the RMR rather than sex differences in risk factors. In this study we examine the age pattern of the absolute difference in male to female mortality rates (DMR) as an alternative measure in a historical context and compare it to the RMR pattern. Whereas the RMR is close to one at every age in the 19th and early 20th century and increases until the present day, the adult age pattern of the DMR is relatively stable throughout the last 150 years. We also found that the DMR is approximately exponentially increasing from age 40 to 90, implying a universal biological force behind sex differentials in mortality. However, interactions between biology, behavior and environment are complicated and have to be considered when interpreting these findings. Moreover, between ages 15 and 40 the DMR declined in the second half of the 20th century, whereas the RMR increased. Hence, the trend in the latter measure is likely to be an artifact of very different mortality regimes between populations. Therefore, we argue that it is necessary to consider both measures when conducting comparative analyses and to be careful in interpreting their time, cross-cultural and age trends, since they can lead to different conclusion about sex specific underlying risk factors.
    Keywords: England, Europe, France, Sweden, adult mortality, historical analysis, sex differentials
    JEL: J1 Z0
    Date: 2014–06
  10. By: Alena Bičáková; Štěpán Jurajda
    Abstract: It is well known that highly female fields of study in tertiary education are characterized by higher fertility. However, existing work does not disentangle the selection-causality nexus. We use variation in gender composition of fields of study implied by the recent expansion of tertiary education in 19 European countries and a difference-in-differences research design, to show that the share of women on study peer groups affects early fertility levels only little. Early fertility by endogamous couples, i.e., by tertiary graduates from the same field of study, declines for women and increases for men with the share of women in the group, but non-endogamous fertility almost fully compensates for these effects, consistent with higher early fertility in highly female fields of study being driven by selection of family-oriented students into these fields. We also show that the EU-wide level of gender segregation across fields of study has not changed since 2000, despite heterogeneous country-level evolution.
    Keywords: Field-of-Study Gender Segregation, Tertiary Graduates, Fertility
    JEL: I23 J13 J16
    Date: 2014–05–27
  11. By: Oded Galor; Marc Klemp
    Abstract: This research explores the biocultural origins of human capital formation. It presents the first evidence that moderate fecundity was conducive for long-run reproductive success within the human species. Exploiting an extensive genealogy record for nearly half a million individuals in Quebec during the seventeenth and eighteenth centuries, the study traces the number of descendants of early inhabitants in the subsequent four generations. Using the time interval between the date of marriage and the first live birth as a measure of reproductive capacity, the research establishes that while a higher fecundity is associated with a larger number of children, an intermediate level maximizes long-run reproductive success. The finding further indicates that the optimal level of fecundity was below the population median, suggesting that the forces of natural selection favored individuals with a lower level of fecundity. The research lends credence to the hypothesis that during the Malthusian epoch, natural selection favored individuals with a larger predisposition towards child quality, contributing to human capital formation, the onset of the demographic transition and the evolution of societies from an epoch of stagnation to sustained economic growth.
    Keywords: Demography, Evolution, Human Capital Formation, Natural Selection, Fecundity, Quantity-Quality Trade-O?, Long-Run Reproductive Success
    Date: 2014
  12. By: Sumarto, Sudarno; De Silva, Indunil
    Abstract: The aim of this study is twofold. First, despite the vast empirical literature on testing the neoclassical model of economic growth using cross-country data, very few studies exist at the subnational level. We attempted to fill this gap by using panel data for 2002–12, a modified neoclassical growth equation, and a dynamic-panel estimator to investigate the effect of both health and education capital on economic growth and poverty at the district level in Indonesia. Second, although most existing cross-country studies tend to concentrate only on education as a measure of human capital, we expanded the analysis and probed the effects of health capital as well. As far as we are aware, no study has done a direct and comprehensive examination of the impacts of health on growth and poverty at the subnational level. Thus, this study is the first at the subnational level, and our findings will be particularly relevant in understanding the role of both health and education capital in accelerating growth and poverty reduction efforts. The empirical findings are broadly encouraging. First, nullifying any doubts on the reliability of Indonesian subnational data, our results suggest that the neoclassical model augmented by both health and education capital provides a fairly good account of cross-district variation in economic growth and poverty in Indonesia. We found that the results on conditional convergence, physical capital investment rate, and population growth confirm the theoretical predictions of the augmented neoclassical model. We also found that both health and education capital had a relatively large and statistically significant positive effect on the growth rate of per capita income. Economic growth was found to play a vital role in educing Indonesian poverty, reinforcing the importance of attaining higher rates of economic growth. Findings from the poverty–human capital model showed that districts with low levels of education are characterized by higher levels of poverty. We found that regions with mediocre immunization coverage and greater than average prevalence of waterborne diseases had higher poverty rates and lower output per capita. Similarly, regions with higher numbers of births attended by a skilled birth attendant were associated with lower poverty rates and higher economic output. Our results in particular suggest that, in designing policies for growth, human development, and poverty reduction, it is necessary to broaden the concept of human capital to include health as well.
    Keywords: Neoclassical growth, poverty, human capital, health, education, dynamic panel
    JEL: I15 I18 I3 I31 O4
    Date: 2014–02–14
  13. By: Phouphet KYOPHILAVONG; Gazi Salah Uddin; Muhammad Shahbaz
    Abstract: The relationship between financial development and economic growth is not conclusive in existing economics literature. The aim of this paper is to test two hypotheses: ‘supply-leading’ hypothesis and ‘demand-following’ hypothesis, using Laos time series data. The ARDL bounds testing approach to cointegration is used to carry out this task. Our results confirm the presence of feedback effect between both variables. Financial development promotes economic growth and in resulting, economic growth leads financial development.
    Keywords: Finance-growth nexus, ARDL approach, Granger causality, Laos
    JEL: O11 O16 O53
    Date: 2014–07–24
  14. By: Alexander Alexeev; Mikhail Sokolov
    Abstract: This paper develops an axiomatic theory of an economic variable average growth rate (average rate of change) measurement. The structures that we obtain generalize the conventional measures for average rate of growth (such as the difference quotient, the continuously compounded growth rate, etc.) to an arbitrary domain of the underlying variable and comprise various models of growth. These structures can be described with the help of intertemporal choice theory by means of parametric families of time preference relations on the “prize-time” space with a parameter representing the subjective discount rate.
    Keywords: average growth rate, average rate of change, time preferences, discounting
    JEL: C43 D90
    Date: 2013–06–19
  15. By: Alia, Didier Yelognisse; Anago, Romuald E. Kouadio
    Abstract: The aid-growth literature has been explored using a wide range of econometric methodologies. The evidence of the effectiveness of aid to promote economic growth is mixed, suggesting that the link between aid and growth is complex and may not be well ident
    Keywords: aid effectiveness and growth, nonlinear models, panel threshold, Africa
    Date: 2014
  16. By: Arndt, Channing; Schlosser, Adam; Strzepek, Kenneth
    Abstract: Malawi confronts a development imperative in a context of rising temperatures and deep uncertainty about precipitation trends. We evaluate the implications of climate change for overall growth and development prospects to 2050. We focus on three impact ch
    Keywords: Malawi, climate change, growth, development
    Date: 2014
  17. By: Njindan Iyke, Bernard
    Abstract: This paper examines the dynamic causal linkages between electricity consumption and economic growth in Nigeria within a trivariate VECM, for the period 1971-2012. The paper obviates the variable omission bias, and the use of cross-sectional techniques that characterise most existing studies. The results show that there is a distinct causal flow from electricity consumption to economic growth: both in the short run and in the long run. This finding supports the electricity-led growth hypothesis, as documented in the literature. The paper urges policy-makers in Nigeria to implement policies which enhance the generation of electricity in order to engineer economic growth. Appropriate monetary policies must also be put in place, in order to moderate inflation, thus enhancing growth.
    Keywords: Electricity Consumption, Economic Growth, Inflation, Cointegration, Causality, Nigeria
    JEL: C32 Q43
    Date: 2014–07–13
  18. By: Pedro Bento (West Virginia University, College of Business and Economics)
    Abstract: I introduce patents into a general equilibrium model of innovation, where innovators choose between creating a new product market and competing in an existing market. Patent holders demand royalties from sequential innovators, but are constrained by the ability of innovators to work around patents. I show patent protection acts as a net tax on sequential innovators, reducing both competition and productivity growth. Calibrated to match moments from U.S. data, the model predicts that eliminating patent protection in the U.S. would generate a 23% increase in steady-state productivity growth as well as an increase in welfare equivalent to that from a 16% increase in annual consumption. I test several implications of the model using both U.S. and cross-country data. Consistent with the model, the data suggests an increase in the strength of patent protection reduces both productivity growth and the average quality of innovations.
    Keywords: patent protection, competition, innovation, productivity, regulation, growth
    JEL: O1 O4
    Date: 2013–10
  19. By: Ezzahidi, Elhadj; El Alaoui, Aicha
    Abstract: Employment is linked to growth at least in the long-run. Thus, to reduce structurally unemployment it is necessary to boost growth. Thus, any strategy seeking to reduce unemployment must be devised with a good knowledge of the growth content in terms of jobs. In this paper, we use Okun’s law, arc point elasticity, and a simple econometric model to assess the intensity of the links between economic growth and (un)employment in Morocco. Okun’s law provides evidence that economic growth in Morocco is linked with a reduction of the unemployment rate. The sectors intensities to create jobs are very different and provide unsystematic results. Using an average measure of elasticity over the period 1999-2009, we find that many sectors were net losers of jobs. The overall growth-elasticity of employment is positive but low.
    Keywords: Growth, Jobs’ creation, Growth-elasticity of employment, Morocco
    JEL: E2 J2 J6 J60 O4
    Date: 2014–02–17
  20. By: Yang, Liu
    Abstract: This passage mainly deals with the problem of why different transition countries have different transition mode and different economic performance. According to this research, it has been found that the economic system of the traditional socialist countries played an important role in their process of reform and transition. The socialist countries with their different economic systems had determined the economic performance, the space, as well as the environment of the transition. All of this jointly formed the initial conditions of the transition, which further determined the different transition mode of the (post) socialist countries. The success or failure of internal reform on planned economies profoundly affected their later transition. On this occasion, it was not the different countries chose the specific transition mode, but was the transition mode had already been determined in the process of institutional change. If we concentrate on the process of the whole institutional change in these (post) socialist countries, the preconceptions of “radicalism” or “gradualism” will not lead the problems to the wrong path. By making the comparative research on different transition countries, an institutional reason was provided in order to better illustrate the China’s catch-up development after her reform and opening compared with other transition economies in their process of system transition and institutional change.
    Keywords: economic system, socialist country, transition economy, institutional change, transition mode, structural reform, economic performance,
    Date: 2014–07
  21. By: Chong-Kee Yip (Chinese University of Hong Kong); Tsz-Nga Wong (Bank of Canada)
    Abstract: What makes countries productive and rich? This paper endogenizes technology and total factor productivity (TFP) based on a model of technology assimilation. We consider an economy with a large stock of production ideas, where the factor requirements of ideas are different from its factor endowment. Firms can undergo an assimilation process which modifies ideas with respect to their factor endowment. The equilibrium level of TFP and the shape of the production function depend on the deep parameters that govern the assimilation power and the distribution of ideas. We apply the model to study cross- country income differences. Once foreign productive ideas are free to assimilate, there is symmetry breaking of the autarky equilibrium. Depending on the assimilation power, a laggard country can either catch up with the frontier countries (and their productive ideas) or fall into an assimilation trap with stagnant income. An advance in the world frontier technology polarizes the world economy. Finally, the model is used to study a number of challenging issues in growth and development, namely, the Lucas (1993) miracle, the "Twin Peaks" phenomenon of club convergence, the Flying-Geese Pattern of development, and the leapfrogging in technology.
    Date: 2014

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