nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒10‒22
eight papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. Back to Basics: Basic Research Spillovers, Innovation Policy and Growth By Douglas Hanley; Ufuk Akcigit; Nicolas Serrano-Velarde
  2. The Economic Costs of Civil War: Synthetic Counterfactual Evidence and the Effects of Ethnic Fractionalization By Stefano Costalli; Luigi Moretti; Costantino Pischedda
  3. Demographic Transition and Economic Welfare: The Role of In-Cash and In-Kind Transfers By Stephen M. Miller; Kyriakos Neanidis
  4. The Political Economy of Growth, Inequality, the Size and Composition of Government Spending By Klaus Schmidt-Hebbel; José Carlos Tello
  5. Progressive Taxation, Endogenous Growth, and Macroeconomic (In)stability By Jang-Ting Guo; Shu-Hua Chen
  6. Effects of urbanization on economic growth and human capital formation in Africa By Mohamed El Hedi Arouri; Adel Ben Youssef; Cuong Nguyen-Viet; Agnès Soucat
  7. Finance-Growth Nexus and Dual Banking System: Relative Importance of Islamic Banks By Pejman Abedifar; Iftekhar Hasan; Amine Tarazi
  8. Climate change and economic growth in sub-Sahara Africa: A nonparametric evidence By Paul Alagidede and George Adu

  1. By: Douglas Hanley; Ufuk Akcigit; Nicolas Serrano-Velarde
    Abstract: This paper introduces a model of endogenous growth through basic and applied research. Basic research differs from applied research in the nature and the magnitude of the generated spillovers. We propose a novel way of empirically identifying these spillovers and embed them in a general equilibrium framework with private firms and a public research sector. After characterizing the equilibrium, we estimate our model using micro-level data on research expenditures by French firms. Our key finding is that standard R&D policies can accentuate the dynamic misallocation in the economy. We also find a strong complementarity between the property rights of basic research and the optimal funding of public research.
    Keywords: Innovation, basic research, applied research, research and development, govern- ment spending, endogenous growth, spillover
    JEL: O31 O38 O40 L78
    Date: 2014–01
  2. By: Stefano Costalli (University of Essex); Luigi Moretti (Univeristy of Padova); Costantino Pischedda (Columbia University)
    Abstract: There is a consensus that civil wars entail enormous economic costs, but we lack reliable estimates, due to the endogenous relationship between violence and socio-economic conditions. This paper measures the economic consequences of civil wars with the synthetic control method. This allows us to identify appropriate counterfactuals for assessing the national-level economic impact of civil war in a sample of 20 countries. We find that the average annual loss of GDP per capita is 17.5 percent. Moreover, we use our estimates of annual losses to study the determinants of war destructiveness, focusing on the effects of ethnic heterogeneity. Building on an emerging literature on the relationships between ethnicity, trust, economic outcomes, and conflict, we argue that civil war erodes interethnic trust and highly fractionalized societies pay an especially high “price”, as they rely heavily on interethnic business relations. We find a consistent positive effect of ethnic fractionalization economic war-induced loss.
    Date: 2014–09
  3. By: Stephen M. Miller (University of Nevada, Las Vegas and University of Connecticut); Kyriakos Neanidis (University of Manchester)
    Abstract: Do in-cash and in-kind transfers to families affect parental fertility choices and economic welfare differently? We examine this question via a demographic transition channel in the context of a two-period overlapping generations model. In childhood, reproductive agents face a non-zero probability of death, while as adults, they allocate their time to work, leisure, and child rearing activities. Health status in adulthood exhibits "state dependence," as it depends on health in childhood. We find that cash transfers lead to both higher fertility and welfare if parents strongly value the quantity of their children. This positive welfare effect dominates an indirect negative welfare effect due to a lower growth rate. But, if parents value the quality of their children, in-kind transfers yield greater welfare, along with lower fertility and higher economic growth.
    Keywords: fertility, health, growth, transfers, welfare
    JEL: F35 F43 I12 O41
    Date: 2014–09
  4. By: Klaus Schmidt-Hebbel (Universidad Catolica de Chile); José Carlos Tello (Departamento de Economía de la PUC del Perú)
    Abstract: This paper develops a dynamic general-equilibrium political-economy model for the optimal size and composition of public spending. An analytical solution is derived from majority voting for three government spending categories: public consumption goods and transfers (valued by households), as well as productive government services (complementing private capital in an endogenous-growth technology). Inequality is re ected by a discrete distribution of innitely-lived agents that dier by their initial capital holdings. In contrast to the previous literature that derives monotonic (typically negative) relations between inequality and growth in one-dimensional voting environments, this paper establishes conditions, in an environment of multi-dimensional voting, under which a non-monotonic, inverted U-shape relation between inequality and growth is obtained. This more general result { that inequality and growth could be negatively or positively related { could be consistent with the ambiguous or inconclusive results documented in the empirical literature on the inequality-growth nexus. The paper also shows that the political-economy equilibrium obtained under multi-dimensional voting for the initial period is time-consistent. JEL Classification-JEL: D72, E62, H11, H31
    Keywords: Desigualdad, crecimiento endógeno, votación multidimensional, impuesto endógeno.
    Date: 2014
  5. By: Jang-Ting Guo (Department of Economics, University of California Riverside); Shu-Hua Chen (National Taipei University)
    Abstract: In the context of a standard one-sector AK model of endogenous growth, we show that the economy exhibits equilibrium indeterminacy and belief-driven aggregate fluctuations under progressive taxation of income. When the tax schedule is regressive or flat, the economy's balanced growth path displays saddle-path stability and equilibrium uniqueness. These results imply that in sharp contrast to a conventional automatic stabilizer, progressive income taxation may destabilize an endogenously growing macroeconomy by generating cyclical fluctuations driven by agents' self-fulfilling expectations or sunspots.
    Keywords: Progressive Income Taxation, Endogenous Growth, Equilibrium (In)determinacy.
    JEL: E62 O41
    Date: 2014–09
  6. By: Mohamed El Hedi Arouri (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans); Adel Ben Youssef (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis (UNS)); Cuong Nguyen-Viet (Chercheur Indépendant - Aucune); Agnès Soucat (Chercheur Indépendant - Aucune)
    Abstract: The objective of this paper is to investigate the impacts of urbanization on human capital andeconomic growth in Africa. It seeks to contribute to the urbanization-growth debate byinvestigating how urbanization is linked to human capital accumulation and economic growth.More precisely, compared to previous studies on the urbanization-growth nexus, we (i) focusexclusively on African countries; (ii) consider both direct and indirect channels through whichurbanization may influence economic activity and (iii) examine a long period including theevolutions observed in the recent years.
    Keywords: urbanization; economic growth; human capital
    Date: 2014–09–25
  7. By: Pejman Abedifar (LAPE - Laboratoire d'Analyse et de Prospective Economique - Université de Limoges : EA1088 - Institut Sciences de l'Homme et de la Société); Iftekhar Hasan (Fordham University - Fordham University); Amine Tarazi (LAPE - Laboratoire d'Analyse et de Prospective Economique - Université de Limoges : EA1088 - Institut Sciences de l'Homme et de la Société)
    Abstract: This paper investigates the relationship between the coexistence of Islamic banks alongside their conventional counterparts and the quantitative and qualitative development of commercial banking and economic welfare. We study 22 Muslim countries with a dual banking system during the 1999-2009 period and find a positive relationship between the market share of Islamic banks and the development of financial intermediation and economic growth. The results also show a negative linkage between Islamic banks' presence and income inequality and poverty. Moreover, a greater market share of Islamic banks is associated with lower credit risk and cost inefficiency of conventional banks in certain countries. The extent and modality of the relationships considerably depend on the institutional environment within which a dual banking system operates.
    Keywords: Banking System Structure; Financial Development; Finance-Growth Nexus; Islamic Banking
    Date: 2014–09–17
  8. By: Paul Alagidede and George Adu
    Abstract: Climate change has been classed as the greatest and urgent global issue facing humanity today, yet the empirics of the debate remain largely muted, more so with reference to sub-Saharan Africa (SSA), where the impact of warming global temperatures are forecasted to have the worst impact. This paper is a contribution to the empirics of climate change and its effect on sustainable economic growth in SSA using nonparametric regression techniques. We establish the following: the relationship between real GDP per capita on one hand and climate change on the other hand, is intrinsically linear and monotonically decreasing at a constant proportionate rate. This relationship holds for both temperature and precipitation.
    Keywords: climate change, Sub-Saharan Africa, Sustainable Growth, Nonparametric techniques
    JEL: C14 C23 O11 O13 O40 Q54
    Date: 2014

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