nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒09‒25
fourteen papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. Asia's Little Divergence: State Capacity in China and Japan before 1850 By Sng, Tuan-Hwee; Moriguchi, Chiaki
  2. The Impact of Earthquakes on Economic Activity: Evidence from Italy By Francesco Porcelli; Riccardo Trezzi
  3. The Social Evolution of Terror and Genocide across Time and Geographic Space: Perspectives from Evolutionary Game Theory By Charles Anderton
  4. Creativity, Education or What? On the Measurement of Regional Human Capital By Eckhardt Bode; Lucia Perez Villar
  5. "Distribution-led Growth in the Long Run" By Michalis Nikiforos
  6. On the Consequences of Generically Distributed Investments on Flexible Projects in an Endogenous Growth Model By Mauro Bambi; Cristina Di Girolami; Salvatore Federico; Fausto Gozzi
  7. The impact of race and inequality on human capital formation in Latin America during the Nineteenth and Twentieth Centuries By Enriqueta Camps; Stanley Engerman
  8. Growth, Unemployment, and Fiscal Policy: A Political Economy Analysis By Tetsuo Ono
  9. Service Sector Productivity and Economic Growth in Asia By Jong-Wha Lee; Warwick J. McKibbin
  10. Immigration and economic growth in the OECD countries 1986-2006: A panel data analysis By Ekrame Boubtane; Jean-Christophe Dumont
  11. New Monthly Estimation Approach for Nowcasting GDP Growth: The Case of Japan By Naoko Hara; Shotaro Yamane
  12. Managerial Capital and Business R&D as Enablers of Productivity Convergence By Dan Andrews; Ben Westmore
  13. Patterns of Structural Change in Developing Countries By Vries, Gaaitzen de; Timmer, Marcel; Vries, Klaas de
  14. On the (De)Stabilizing Effect of Public Debt in a Ramsey Model with Heterogeneous Agents By Kazuo Nishimura; Carine Nourry; Thomas Seegmuller; Alain Venditti

  1. By: Sng, Tuan-Hwee; Moriguchi, Chiaki
    Abstract: This paper explores the role of state capacity in the comparative economic development of China and Japan. Before 1850, both nations were ruled by stable dictators who relied on bureaucrats to govern their domains. We hypothesize that agency problems increase with the geographical size of a domain. In a large domain, the ruler's inability to closely monitor bureaucrats creates opportunities for the bureaucrats to exploit taxpayers. To prevent overexploitation, the ruler has to keep taxes low and government small. Our dynamic model shows that while economic expansion improves the ruler's finances in a small domain, it could lead to lower tax revenues in a large domain as it exacerbates bureaucratic expropriation. To test these implications, we assemble comparable quantitative data from primary and secondary sources. We find that the state taxed less and provided fewer local public goods per capita in China than in Japan. Furthermore, while the Tokugawa shogunate's tax revenue grew in tandem with demographic trends, Qing China underwent fiscal contraction after 1750 despite demographic expansion. We conjecture that a greater state capacity might have prepared Japan better for the transition from stagnation to growth.
    Keywords: Comparative Institutional Analysis, Geography, Principal-Agent Problem, Institutions and Growth
    JEL: D73 N15 N40 O43 P52
    Date: 2014–08
  2. By: Francesco Porcelli (Business School, University of Exeter, UK); Riccardo Trezzi (Faculty of Economics, University of Cambridge, UK)
    Abstract: Although earthquakes are large idiosyncratic shocks for affected regions, little is known of their impact on economic activity. Seismic events are rare, the data is crude (the Richter scale measures the magnitude but says nothing of the associated damages) and counterfactuals are often entirely absent. We suggest an innovative identification strategy to address these issues based on the so-called ’Mercalli scale’ ranks - a geophysical methodology devised to gauge seismic damages relying on a newly compiled dataset following 95 Italian provinces from 1986 to 2011 (including 22 seismic episodes) offering an ideal ground for identification. Also, we carry out counterfactuals taking advantage of ex ante identical neighboring provinces that only differ ex post in terms of damages. Contrary to conventional views, we find that the impact of seismic events on output is negligible (or even positive) including after the most devastating events.
    Keywords: Natural disasters, Mercalli scale
    JEL: Q54 E00 J01
    Date: 2014–09
  3. By: Charles Anderton (Department of Economics and Accounting, College of the Holy Cross)
    Abstract: This article uses evolutionary game theory to reveal the interpersonal and geographic characteristics of a society that make it vulnerable to a conquest from within by terrorist organizations and genocide architects. Under conditions identified in the space-less version of the model, entrepreneurs of violence can create the social metamorphosis of a peaceful people group into one that supports or does not resist violence against an out-group. The model is extended into geographic space by analyzing interactions among peaceful and aggressive phenotypes in Moore and von Neumann neighborhoods. The model also reveals policy interventions in which the social evolution of aggression never gets started or comes to a halt if already underway.
    Keywords: Terrorism, Terrorism, Genocide, Game Theory
    JEL: C73 D74 H56
    Date: 2014–09
  4. By: Eckhardt Bode; Lucia Perez Villar
    Abstract: This paper substantiates the debate following Richard Florida’s suggestion to measure regional human capital by creative occupations rather than education. Consistent with Florida’s notion of creativity, it suggests a microfoundation that relates creativity to workers’ cognitive and noncognitive skills. It shows that this microfoundation is similar to that of human capital in recent labor economics, which has facilitated important new insights. It also shows that Florida’s measure is too crude to make a difference. Nonethe-less, it is time to rethink regional human capital. Occupations may help project workers’ cognitive and noncognitive skills from the micro to the regional level
    Keywords: Human Capital, Education, Creativity, Cognitive Skills, Noncognitive Skills, Occupation, Regional Wages, Regional Growth
    JEL: I21 I25 J24 R12 R23
    Date: 2014–09
  5. By: Michalis Nikiforos
    Abstract: The paper examines the long-run fluctuations in growth and distribution through the prism of wage-and profit-led growth. We argue that the relation between distribution of income and growth changes over time. We propose an endogenous mechanism that leads to fluctuations between wage- and profit-led periods. Our model is a linear version of Goodwin's predator–prey model, but with a reversal of the roles for predator and prey: the growth rate acts as the predator and the distribution of income as the prey. These fluctuations need to be taken into account when someone estimates empirically the effect of a change in distribution on utilization and growth. We also examine our argument in relation to the double movement of Karl Polanyi, the Kuznets curve, and the theories of long swings proposed by Albert Hirschman and Michal Kalecki.
    Keywords: Distribution-led; Long Swings; Oscillations; Predator-prey
    JEL: B22 E11 E12 E21 E22 E32
    Date: 2014–09
  6. By: Mauro Bambi; Cristina Di Girolami; Salvatore Federico; Fausto Gozzi
    Abstract: In this paper we argue that differences in the investment projects’ features can help to explain the observed differentials in output growth and in output volatility across countries. This result is achieved by studying analytically an endogenous growth model where investments are (generically) distributed over multi-period flexible projects leading to new capital once completed. Recently developed techniques in dynamic programming are adapted and used to fully characterized the balanced growth path and transitional dynamics of this model. Based on this analytical ground, several numerical exercises are performed to show how the key results of our analysis are also quantitatively relevant.
    Keywords: investment projects, distributed delays, optimal control, dynamic programming, infinite dimensional problem.
    JEL: E22 E32 O40
    Date: 2014–07
  7. By: Enriqueta Camps; Stanley Engerman
    Date: 2014–09
  8. By: Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This study presents an overlapping-generations model featuring endogenous growth, collective wage-bargaining, and probabilistic voting over fiscal policy. We charac- terize a Markov-perfect political equilibrium of the voting game within and across generations and show the following results. First, greater bargaining power of unions lowers the growth rate of capital and creates a positive correlation between unem- ployment and government debt. Second, greater political power of the old lowers the growth rate and shifts government expenditure from the unemployed to the old. Third, a balanced budget requirement increases the growth rate but may benefit the old at the expense of the unemployed.
    Keywords: Economic Growth; Fiscal Policy; Government Debt; Unemployment; Voting
    JEL: E24 E62 H60
    Date: 2014–08
  9. By: Jong-Wha Lee (Asian Development Bank Institute (ADBI)); Warwick J. McKibbin
    Abstract: This paper explores the impacts of more rapid growth in labor productivity in the service sector in Asia based on an empirical general equilibrium model. The model allows for input–output linkages and capital movements across industries and economies, and consumption and investment dynamics. We find that faster productivity growth in the service sector in Asia benefits all sectors eventually, and contributes to the sustained and balanced growth of Asian economies, but the dynamic adjustment is different across economies. This adjustment depends on the sectoral composition of each economy, the capital intensity of each sector, and the openness of each sector to international trade. In particular, during the adjustment to higher services productivity growth, there is a significant expansion of the durable manufacturing sector that is required to provide the capital stock that accompanies the higher aggregate economic growth rate.
    Keywords: the service sector, Labour Productivity, general equilibrium model, balanced growth
    JEL: J21 O11 O14 O41 O53
    Date: 2014–07
  10. By: Ekrame Boubtane (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Jean-Christophe Dumont (OECD - Organisation for Economic Cooperation and Development)
    Abstract: This paper presents a reappraisal of the impact of migration on economic growth for 22 OECD countries between 1986 and 2006. It is based on a unique dataset that enables to distinguish net migration of the native-born and foreign-born by skill level. Migration is introduced in an augmented Solow-Swan model and the results are obtained using a GMM estimation, in order to deal with the potential endogeneity of the migration variables. In this framework, we identify a positive impact of the human capital brought by migrants on economic growth. The contribution of immigrants to the human capital accumulation tends to dominate the mechanical dilution effect, but the net effect is fairly small, including in countries which have highly selective migration policies.
    Keywords: International migration; human capital; economic growth; generalized methods of moments
    Date: 2013–02
  11. By: Naoko Hara (Bank of Japan); Shotaro Yamane (Bank of Japan)
    Abstract: This paper proposes a new approach for nowcasting as yet unavailable GDP growth by estimating monthly GDP growth with a large dataset. The model consists of two parts: (i) a few indicators that explain a large part of the variation in GDP growth, and (ii) principal components, which are orthogonal to those indicators and are extracted from a number of GDP source data, capturing the rest of the variation. The approach relies on a static factor model comprising a number of indicators that have a simultaneous relationship with GDP. Applying this approach to data for Japan, we find that our model produces more precise estimates of recent GDP growth at an earlier stage of nowcasting than the nowcasts of professional forecasters.
    Keywords: Factor Models; Forecasting; Nowcasting; Monthly GDP; Real-time Data
    JEL: C53 C82 E37
    Date: 2013–10–15
  12. By: Dan Andrews; Ben Westmore
    Abstract: This paper explores the role of managerial capital and business research and development (R&D) in fostering multifactor productivity (MFP) convergence in a panel of 42 countries. The OECD long-term growth model is augmented to show that, in addition to trade openness, an economy’s speed of convergence to its long-run steady state level of MFP is an increasing function of the quality of its managerial capital and the size of its domestic R&D sector. The economic importance of these two enabling factors are examined in the context of a scenario, whereby MFP growth at the technological frontier is ½ percentage point higher (than in the baseline projection) per annum until 2060. This exercise shows that some countries benefit significantly more from higher frontier growth than could be expected based on their trade openness alone. In turn, evidence on the policy determinants of managerial capital and business R&D is reviewed, which highlights the importance of structural reforms and carefully-designed innovation policies. Capital managérial et R-D des entreprises, moteurs de la convergence de la productivité Ce document analyse le rôle que jouent le capital managérial et les activités de recherche et de développement (R-D) menées par les entreprises pour renforcer la convergence de la productivité multifactorielle (PMF) dans un groupe de 42 pays. Le modèle de croissance à long terme de l’OCDE est élargi pour montrer que, outre l’ouverture aux échanges, la vitesse de convergence d’une économie vers son niveau de stabilité de la PMF à long terme est une fonction croissante de la qualité de son capital managérial et de la taille de son secteur national de la R-D. L’importance économique de ces deux facteurs déterminants est examinée dans le contexte d’un scénario dans lequel la croissance de la PMF à la frontière technologique est supérieure de ½ point de pourcentage (à celle retenue dans la projection de référence) par an jusqu’en 2060. Cet exercice montre que certains pays qui ont atteint la frontière bénéficient d’une croissance beaucoup plus forte que ce à quoi on pourrait s’attendre en se basant uniquement sur leur ouverture aux échanges. Cette étude examine ensuite les éléments de l’action publique qui déterminent le capital managérial et la R-D des entreprises, révélant l’importance des réformes structurelles et de politiques soigneusement conçues en faveur de l’innovation.
    Keywords: productivity, R&D, management, long run growth, conditional convergence, management, productivité, R-D, croissance à long terme, convergence conditionnelle
    JEL: L20 O11 O30 O43 O47
    Date: 2014–09–05
  13. By: Vries, Gaaitzen de; Timmer, Marcel; Vries, Klaas de (Groningen University)
    Abstract: This paper introduces the updated and extended Groningen Growth and Development Centre (GGDC) 10-Sector database. The database includes annual time series of value added and persons employed for ten broad sectors of the economy from 1950 onwards. It now includes eleven countries in Asia (China has been added compared to the previous release), nine in Latin America and eleven in Sub-Saharan Africa. We use the GGDC 10-Sector database to document patterns of structural change in developing countries. We find that the expansion of manufacturing activities during the early post World War II period was related to a growth-enhancing reallocation of resources in most countries in Asia, Africa and Latin America. This process of structural change stalled in many African and Latin American countries during the mid-1970s and 1980s. When growth rebounded in the 1990s, workers mainly relocated to market services industries, such as retail trade and distribution. Though such services have higher productivity than much of agriculture, they are not technologically dynamic and have been falling behind the world frontier.
    Date: 2014
  14. By: Kazuo Nishimura (RIEB, Kobe University - Kobe University, KIER, Kyoto University - Kyoto University); Carine Nourry (AMSE - Aix-Marseille School of Economics - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM), IUF - Institut Universitaire de France - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique); Thomas Seegmuller (AMSE - Aix-Marseille School of Economics - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM)); Alain Venditti (AMSE - Aix-Marseille School of Economics - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM), EDHEC Business School - Département Comptabilité, Droit, Finance et Economie)
    Abstract: We introduce public debt in a Ramsey model with heterogenous agents and a public spending externality affecting utility which is financed by income tax and public debt. We show that public debt considered as a fixed portion of GDP can have a stabilizing or destabilizing effect depending on some fundamental elasticities. When the public spending externality is weak and the elasticity of capital labor substitution is low enough, public debt can only be destabilizing, generating damped or persistent macroeconomic fluctuations. Whereas when the public spending externality and the elasticity of capital labor substitution are strong enough, public debt can be stabilizing, driving to monotone convergence an economy experiencing damped or persistent fluctuations without debt.
    Keywords: endogenous cycles; heterogeneous agents; public spending; public debt; borrowing constraint
    Date: 2014–06

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