nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒09‒29
nineteen papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. Natural Land Productivity, Cooperation and Comparative Development By Anastasia Litina
  2. Public goods and ethnic diversity: evidence from deforestation in Indonesia By Alberto Alesina; Caterina Gennaioli; Stefania Lovo
  3. Spatial Takeoff in the First Industrial Revolution By Trew, Alex
  4. Brain Drain or Gain? The Structure of Production, Emigration and Growth By Inklaar, Robert Christiaan; Papakonstantinou, Marianna
  5. Cultural diversity at the top: Does it increase innovation and firm performance? By Nikos Bozionelos; Thomas Hoyland
  6. The Growth-Inflation Nexus for the US over 1801-2013: A Semiparametric Approach By Mehmet Balcilar; Rangan Gupta; Charl Jooste
  7. Is an Increasing Capital Share under Capitalism Inevitable? By Yew-Kwang NG
  8. The rise or the fall of the wall? Determinants of low entrepreneurship in East Germany By Kuehn, Zoe
  9. Hong Kong's Growth Synchronisation with China and the U.S.: A Trend and Cycle Analysis By Dong He; Wei Liao; Tommy Wu
  10. Science, Innovation and National Growth By Thomas Brenner
  11. Endogenous Growth with Addictive Habits By Emmanuelle Augeraud-Veron; Mauro Bambi
  12. Infrastructure, growth, and inequality : an overview By Calderon, Cesar; Serven, Luis
  13. Optimal patent breadth in a horizontal innovation growth model By Reinan Ribeiro; David Turchick
  14. Immigration, unemployment and GDP in the host country: Bootstrap panel Granger causality analysis on OECD countries By Ekrame Boubtane; Dramane Coulibaly; Christophe Rault
  15. The Emperor Has New Clothes: Empirical Tests of Mainstream Theories of Economic Growth By Greasley, David; Hanley, Nick; McLaughlin, Eoin; Oxley, Les
  16. Spatial convergence and growth in Indian agriculture: 1967-2010 By Tirtha Chatterjee
  17. Productivity Growth and International Competitiveness By Gu, Wulong; Yan, Beiling
  18. Service Sector Productivity and Economic Growth in Asia By Jong-Wha Lee; Warwick J. McKibbin
  19. Weak Concavity Properties of Indirect Utility Functions in Multisector Optimal Growth Models By Alain Venditti

  1. By: Anastasia Litina (CREA, Université de Luxembourg)
    Abstract: This research advances the hypothesis that natural land productivity in the past, and its effect on the desirable level of cooperation in the agricultural sector, had a persistent effect on the evolution of social capital, the process of industrialization and comparative economic development across the globe. Exploiting exogenous sources of variations in land productivity across a) countries; b) individuals within a country, and c) migrants of different ancestry within a country, the research establishes that lower level of land productivity in the past is associated with more intense coope- ration and higher levels of contemporary social capital and development,
    Keywords: Land productivity, Cooperation, Social Capital, trust, Growth, development, Agriculture, Industrialisation
    JEL: O11 O13 O14 O31 O33 O41 O50
    Date: 2014
  2. By: Alberto Alesina; Caterina Gennaioli; Stefania Lovo
    Abstract: We show that the level of deforestation in Indonesia is positively correlated with the degree of ethnic fractionalization of the communities. We explore several channels that may link the two variables. They include the negative effect of ethnic fractionalization on the ability to coordinate and organize resistance against logging companies and a higher level of corruption of politicians less controlled in more fragmented communities.
    Date: 2014–09
  3. By: Trew, Alex
    Abstract: Using the framework of Desmet and Rossi-Hansberg (forthcoming), we present a model of spatial takeoff that is calibrated using spatially-disaggregated occupational data for England in c.1710. The model predicts changes in the spatial distribution of agricultural and manufacturing employment which match data for c.1817 and 1861. The model also matches a number of aggregate changes that characterise the first industrial revolution. Using counterfactual geographical distributions, we show that the initial concentration of productivity can matter for whether and when an industrial takeoff occurs. Subsidies to innovation in either sector can bring forward the date of takeoff while subsidies to the use of land by manufacturing firms can significantly delay a takeoff because it decreases spatial concentration of activity.
    Keywords: Endogenous growth, first industrial revolution, economic geography, structural change,
    Date: 2013
  4. By: Inklaar, Robert Christiaan; Papakonstantinou, Marianna (Groningen University)
    Abstract: There is growing evidence that the opportunity to emigrate stimulates human capital formation, leading to a net increase in human capital, a ?brain gain? rather than a ?brain drain?. In this paper, we present evidence that ?brain gain? is more widespread than currently thought. We find that countries with higher emigration rates show faster growth in knowledge-intensive manufacturing industries, implying that migration leads to increases in human capital. We find that more countries benefit than previously found, in part, because of increases in not only the number of high-skilled but also of medium-skilled workers.
    Date: 2014
  5. By: Nikos Bozionelos (Audencia Recherche - Audencia); Thomas Hoyland (HUBS - Hull University Business School - Hull University)
    Abstract: The article focuses on cultural diversity and whether it has economic value. Though it is undisputed that cultural diversity within a country increases entrepreneurial behaviour the question that remains is whether this heightened entrepreneurial activity results in greater economic achievements. The article reports on a study that was carried out within the London area that presented an ideal setting given that London is a "super-diverse" city with intense economic activity. The results showed that ethnic diversity in the team of owners and partners of firms was indeed associated with greater innovativeness. This was in line with the view that diversity brings a variety of perspectives, skills and ways of thinking that in turn are translated into greater novelty in products or services and ways of performing tasks. On the other hand, however, ethnic diversity at the top did not translate into success at bringing innovations to the market, neither to revenue growth. Neither did the idea that diversity would be especially beneficial for innovation in knowledge-intensive industries find support. Finally, the data suggested that immigrants become entrepreneurs by choice rather than due to lack of better alternatives. The findings of the study raise the serious question of why the greater innovativeness that diversity brings does not generally translate into market and economic success, which opens new avenues for future research.
    Keywords: Diversity; Super-diversity; Global cities; Innovativeness; Market success; Economic success; Discrimination; Financial institutions
    Date: 2014–05–01
  6. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus , via Mersin 10, Turkey); Rangan Gupta (Department of Economics, University of Pretoria); Charl Jooste (Department of Economics, University of Pretoria)
    Abstract: We try and detect whether there exists a threshold level of inflation for the US economy over 1801-2013, beyond which it has a negative effect on economic growth. We use a combination of nonparametric (NP) and instrumental variable semiparametric (SNP-IV) methods to obtain inflation thresholds for the United States. The results suggest that the relationship between growth and inflation is hump shaped—that higher levels of inflation reduce growth more. Our results consistently show that inflation above two per cent negatively affects growth.
    Keywords: Inflation, growth, nonparametric, semiparametric
    JEL: E31 O49 C14
    Date: 2014–09
  7. By: Yew-Kwang NG (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological Univer- sity. Address: 14 Nanyang Drive, Singapore, 637332.)
    Abstract: Piketty’s influential book Capital in the Twenty-First Century and its prominent review by Milanovic in the Journal of Economic Literature both assert the inevitability of an increasing share of capital in total income, given a higher rate of return to capital than the rate of growth in income. This paper shows by a specific example, a logical argument and its intuition that the alleged inevitability is not valid. Even just for capital to grow faster than income, we need an additional requirement that saving of non-capital income is larger than consumption of capital income. Even if this is satisfied, the capital share may not increase as the rate of return may fall and non-capital incomes may increase with capital accumulation.
    Keywords: capital; capitalism; distribution; income; wealth
    JEL: D3 P1
    Date: 2014–10
  8. By: Kuehn, Zoe (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)
    Abstract: Between 1949 and 1989, communism restricted private entrepreneurship in East Germany, but even after reunification in 1990 entrepreneurship remained low compared to other transition economies. To quantify the determinants of low entrepreneurship in East Germany and its impact on economic outcomes, I set up a two-region model economy with occupational and migration choices. Individuals can become workers or entrepreneurs in East or West Germany. In line with German policy after reunification, in East Germany wages are fixed above labor productivity and there are capital subsidies. Managerial knowhow is a combination of innate talent and entrepreneurial parental background which only West Germans possess. Technological growth increases with the innate talent of entrepreneurs. Counter-factual experiments show that the missing tradition of entrepreneurship, while contributing to technological growth, accounts for almost 10 percentage points of the gap between East and West German GDP per capita. On the other hand, reunification (wage setting policy, migration possibilities, and subsidies) slowed down technological growth and increased the output gap by 7 percentage points.
    Keywords: Entrepreneurship; Growth; Allocation of Talent; Social Mobility; Transition
    JEL: E24 F15 J22
    Date: 2014–07
  9. By: Dong He (Hong Kong Monetary Authority); Wei Liao (International Monetary Fund); Tommy Wu (Hong Kong Monetary Authority)
    Abstract: This paper investigates the synchronisation of Hong Kong's economic growth with mainland China and the US. We identify trends of economic growth based on the permanent income hypothesis. Specifically, we first confirm whether real consumption in Hong Kong and mainland China satisfies the permanent income hypothesis, at least in a weak form. We then identify the permanent and transitory components of income of each economy using a simple state-space model. We use structural vector autoregression models to analyse how permanent and transitory shocks originating from mainland China and the US affect the Hong Kong economy, and how such influences evolve over time. Our main findings suggest that transitory shocks from the US remain a major driving force behind Hong Kong's business cycle fluctuations. On the other hand, permanent shocks from mainland China have a larger impact on Hong Kong's trend growth.
    JEL: E21 F44
    Date: 2014–07
  10. By: Thomas Brenner (Economic Geography and Location Research, Philipps-University, Marburg)
    Abstract: This paper studies the effects of public research (publications) and innovation output (patents) on national economic growth with the help of a GMM panel regression including 114 countries. Effects on productivity growth and capital and labor inputs are distinguished. Furthermore, different time lags are examined for the various analyzed effects and two time periods as well as less and more developed countries are studied separately. The results confirm the effect of innovation output on productivity for more developed countries. Simultaneously, innovation output is found to have negative impacts on capital and labor inputs, while public research is found to have positive impacts on labor inputs.
    Keywords: national growth, innovation, public research, growth
    JEL: O11 O31 E10 C23
    Date: 2014–09–14
  11. By: Emmanuelle Augeraud-Veron; Mauro Bambi
    Abstract: In this paper, we investigate the global dynamics of an endogenous growth model with linear technology and addictive habits. We find feasible parameters’ conditions under which: a) the resulting equilibrium consumption path is steeper than in a standard AK model; b) endogenous fluctuations in the form of damping fluctuations around the balanced growth path emerge; c) the Easterlin’s paradox emerges. The relevance of these results is explained comparing our findings with the results already known in the existing literature.
    Keywords: Habit formation; consumption smoothing, endogenous fluctuations.
    JEL: E00 E21 O40
    Date: 2014–05
  12. By: Calderon, Cesar; Serven, Luis
    Abstract: Academics and policy makers have long considered an adequate supply of infrastructure services to be essential for economic development. This paper reviews recent theoretical and empirical literature on the effects of infrastructure development on growth and income distribution. The theoretical literature has employed a variety of analytical settings regarding the drivers of income growth, the degree to which infrastructure represents a public or a private good, and the extent of market distortions, notably in capital markets. In turn, the empirical literature has used various econometric methodologies on time-series and cross-section macro and microeconomic data to test for the effects of infrastructure development. However, these empirical tests face challenging issues of measurement, identification, and heterogeneity. Overall, the literature finds positive effects of infrastructure development on income growth and, more tentatively, on distributive equity. Still, the precise mechanisms through which these effects accrue, and their full impact on welfare, remain relatively unexplored.
    Keywords: Transport Economics Policy&Planning,Banks&Banking Reform,Public Sector Economics,Economic Theory&Research,Infrastructure Economics
    Date: 2014–09–01
  13. By: Reinan Ribeiro; David Turchick
    Abstract: Patenting and licensing are introduced into the lab-equipment horizontal innovation model of endogenous growth. Patent length is not deterministic, in that patent holders' market power will collapse if and only if their patented goods get successfully imitated. The model is solved in an exact fashion. Consideration of static and dynamic inefficiencies shows that optimal intellectual property rights protection entails maximal patent length, but nonmaximal patent breadth. By fixing a lower patent breadth level, government is able to trade off a modest negative long-term effect on growth for a substantial positive short-term effect on consumption. A third potential source of inefficiency, reputational, is also considered.
    Keywords: intellectual property rights; horizontal innovation; lab-equipment model; growth; patent length; patent breadth.
    JEL: L13 O31 O34 O41
    Date: 2014–09–08
  14. 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); Dramane Coulibaly (EconomiX - CNRS : UMR7166 - Université Paris X - Paris Ouest Nanterre La Défense); Christophe Rault (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)
    Abstract: This paper examines the causality relationship between immigration, unemployment and economic growth of the host country. We employ the panel Granger causality testing approach of Kónya (2006) that is based on SUR systems and Wald tests with country specific bootstrap critical values. This approach allows to test for Granger-causality on each individual panel member separately by taking into account the contemporaneous correlation across countries. Using annual data over the 1980-2005 period for 22 OECD countries, we find that, only in Portugal, unemployment negatively causes immigration, while in any country, immigration does not cause unemployment. On the other hand, our results show that, in four countries (France, Iceland, Norway and the United Kingdom), growth positively causes immigration, whereas in any country, immigration does not cause growth.
    Keywords: Immigration; growth; unemployment; Granger causality
    Date: 2013–02
  15. By: Greasley, David; Hanley, Nick; McLaughlin, Eoin; Oxley, Les
    Abstract: Modern macroeconomic theory utilises optimal control techniques to model the maximisation of individual well-being using a lifetime utility function. Agents face choices over current and future consumption (with resultant implied savings decisions) seeking to maximise the present value of current plus future well-being. However, such inter-temporal welfare-maximising assumptions remain empirically untested. In the work presented here we test whether welfare was in (historical) fact maximised in the US between 1870-2000 and find empirical support for the optimising basis of growth theory, but only once a comprehensive view of what constitutes a country's wealth or capital is taken into account.
    Keywords: comprehensive wealth; US; modern growth theory; inter-temporal utility maximisation
    Date: 2014–08
  16. By: Tirtha Chatterjee (Indira Gandhi Institute of Development Research)
    Abstract: Inter-state diversity has been a perennial feature of Indian agriculture. The study probes if per capita income in Indian agriculture has converged across states in the last four and a half decades. It finds strong evidence in favour of beta convergence but not in favour of sigma convergence. Spatial econometric techniques used in the study aid in identifying the impact of spatial neighbours on the growth of a state. Results indicate significant spatial dependence among states. The study also identifies the drivers of growth agriculture in the last four and a half decades and results indicate that infrastructure like roads, irrigation, electricity aid in growth and so do quality of human capital. Hence, investments targeting higher quality of infrastructure, both physical and human and efficient water management will aid in agricultural growth in India.
    Keywords: Agriculture, growth, regional convergence, spatial dependence
    JEL: O13 O18 R12 R15
    Date: 2014–09
  17. By: Gu, Wulong; Yan, Beiling
    Abstract: This paper presents estimates of effective multifactor productivity (MFP) growth for Canada, the United States, Australia, Japan and selected European Union (EU) countries, based on the EU KLEMS productivity database and the World Input-Output Tables. Effective MFP growth captures the impact of the productivity gains in upstream industries on the productivity growth and international competitiveness of domestic industries, thereby providing an appropriate measure of productivity growth and international competitiveness in the production of final demand products such as consumption, investment and export products. A substantial portion of MFP growth, especially for small, open economies such as Canada?s, is attributable to gains in the production of intermediate inputs in foreign countries. Productivity growth tends to be higher in investment and export products than for the production of consumption products. Technical progress and productivity growth in foreign countries have made a larger contribution to production growth in investment and export products than in consumption products. The analysis provides empirical evidence consistent with the hypothesis that effective MFP growth is a more informative relevant indicator of international competitiveness than is standard MFP growth.
    Keywords: Economic accounts, International trade, Productivity accounts
    Date: 2014–09–09
  18. 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
  19. By: Alain Venditti (Aix-Marseille University (Aix-Marseille School of Economics), CNRS-GREQAM, EHESS & EDHEC)
    Abstract: Studies of optimal growth in a multisector framework are generally addressed in reduced form models. These are defined by an indirect utility function which summarizes the consumers’ preferences and the technologies. Weak concavity assumptions of the indirect utility function allow one to prove differentiability of optimal solutions and stability of steady state. This paper shows that if the consumption good production function is concave-gamma, and the instantaneous utility function is concave-rho, then the indirect utility function is weakly concave, and its curvature coefficients are bounded from above by a function of gamma and rho.
    Keywords: indirect utility function, social production function, multisector optimal growth model, weak concavity
    JEL: C62 E32 O41
    Date: 2014–09

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