nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒12‒03
nineteen papers chosen by
Marc Klemp
Brown University

  1. Public Goods and Ethnic Diversity: Evidence from Deforestation in Indonesia By Alberto Alesina; Caterina Gennaioli; Stefania Lovo
  2. Fertility and Financial Development: Evidence from U.S. Counties in the 19th Century By Alberto Basso; Howard Bodenhorn; David Cuberes
  3. Innovation, Diffusion, and Trade: Theory and Measurement By Santacreu, Ana Maria
  4. Population, land, and growth By Claire Loupias; Bertrand Wigniolle
  5. Unemployment and Innovation By Joseph E. Stiglitz
  6. Spatial dynamics and convergence: The spatial AK model By Raouf Boucekkine; Carmen Camacho; Giorgio Fabbri
  7. Ready for Revolution? The English Economy before 1800 By Morgan Kelly; Cormac O Grada
  8. Macroeconomic Volatility and Trade in OLG Economies By Antoine Le Riche
  9. Education Policies and Structural Transformation By Cavalcanti Ferreira, Pedro; Monge-Naranjo, Alexander; Torres de Mello Pereira, Luciene
  10. Portuguese economic growth revisited: a technology-gap explanation By José Afonso Mendes; Sandra T. Silva; Ester G. Silva
  11. Longevity and technological change By Gehringer, Agnieszka; Prettner, Klaus
  12. Mobile telecommunications infrastructure and economic growth: Evidence from China By Ward, Michael R.; Zheng, Shilin
  13. Growth and Income Inequality Effects on Poverty: The Case of Pakistan (1988-2011) By Jamal, Haroon
  14. The influence of different production functions on modeling resource extraction and economic growth By Voosholz, Frauke
  15. How Closely is the Distribution of Skills Related to Countries' Overall Level of Social Inequality and Economic Prosperity? By Dirk Van Damme
  16. Entrepreneurship, knowledge, and the industrial revolution By Attar, M. Aykut
  17. Debt Servicing, Aggregate Consumption, and Growth By Mark SetterfieldY; Yun K. Kim
  18. How important is innovation? A Bayesian factor-augmented productivity model on panel data By Bresson G.; Etienne J.; Mohnen P.
  19. How Solid Is Economic Growth in the East African Community? By Nikoloz Gigineishvili; Paolo Mauro; Ke Wang

  1. 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.
    JEL: H0 O1
    Date: 2014–09
  2. By: Alberto Basso; Howard Bodenhorn; David Cuberes
    Abstract: The old-age security hypothesis establishes that one important reason why parents have a large offspring is to ensure that they will receive financial support from them in old age. In this paper we use data on fertility and financial development in 19th century U.S. to indirectly test this theory. In particular, we explore whether more developed local financial markets reduce the incentives for families to have a large offspring. After controlling for several factors likely to create cross-county variation in fertility levels and for potential spatial correlation, we find that the presence of a bank and the degree of financial development in a given county are strongly associated with lower children-to-women ratios. We find compelling evidence for the old-age security hypothesis.
    JEL: N21 N31 N91 R2
    Date: 2014–09
  3. By: Santacreu, Ana Maria (Federal Reserve Bank of St. Louis)
    Abstract: I develop a multicountry-model in which economic growth is driven mainly by domestic innovation and the adoption of foreign technologies embodied in traded intermediate goods. Fitting the model to data on innovation, output per capita, and trade in varieties for the period 1996-2007, I estimate the costs of both domestic innovation and adopting foreign innovations, and then decompose the sources of economic growth around the world. I find that the adoption channel has been especially important in developing countries, and accounts for about 65% of their “embodied” growth. Developed countries grow mainly through the domestic innovation channel, which explains 85% of their “embodied” growth. A counterfactual exercise shows that if all countries reached the same research productivity, then (i) the world’s steady-state growth rate would double, and (ii) developing countries would close the gap in terms of both growth rate and income per capita.
    Keywords: innovation; technology adoption; extensive margin of trade; growth.
    JEL: F11 F43 O33
    Date: 2014–05–01
  4. By: Claire Loupias (EPEE - Centre d'Etudes des Politiques Economiques - Université d'Evry-Val d'Essonne); Bertrand Wigniolle (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper suggests a new explanation for changes in economic and population growth with a long run perspective, emphasizing the role of land in the development process. Starting from a pre-industrialization state called the "Malthusian regime", land and labor are the main production factors. The size of population is limited by the quantity of land available for households and by incomes. Technical progress driven by a "Boserupian effect" may push the economy towards a take-off regime. In this regime, capital accumulation begins and a "learning-by-doing" effect in production takes over from the "Boserupian effect". If this effect is strong enough, the economy can reach an "ultimate growth regime". In the different phases, land plays a crucial role.
    Keywords: Endogenous fertility; Land; Endogenous growth;
    Date: 2013–03
  5. By: Joseph E. Stiglitz
    Abstract: This paper analyzes equilibrium, dynamics, and optimal decisions on the factor bias of innovation in a model of induced innovation. In a model with full employment, we show that (a) if the elasticity of substitution is always less than or greater than unity, there is a unique steady state equilibrium; (b) if the elasticity of substitution is less than unity, the steady state is stable, but convergence is oscillatory; (c) if the elasticity of substitution is greater than unity, the steady state is a saddle point; and (d) if the elasticity of substitution is less than unity for both high and low effective capital labor ratios but greater than unity for intermediate values, then there can be multiple steady states. In a model where efficiency wages lead to equilibrium unemployment, we show that if the elasticity of substitution is less than unity, there will be a bias towards excessive labor augmenting innovation, resulting in too high unemployment, with convergence to the unique steady state being oscillatory, rather than monotonic. Similarly, if the elasticity of substitution between skilled and unskilled labor is less than unity, and there is efficiency wage unemployment for unskilled labor only, there is will be excessively skill-biased innovation. This paper provides an alternative resolution to the Harrod-Domar conundrum of the disparity between the natural and warranted rate of growth to that of Solow, with strong policy implications, for instance, concerning the effects of income distribution and monetary policy both in the short run and the long.
    JEL: E24 O30 O31 O33
    Date: 2014–11
  6. By: Raouf Boucekkine (GREQAM - Aix-Marseille School of Economics (AMSE)); Carmen Camacho (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Giorgio Fabbri (EPEE - Université d'Evry-Val d'Essonne)
    Abstract: We study the optimal dynamics of an AK economy where population is uniformly distributed along the unit circle. Locations only differ in initial capital endowments. Spatio-temporal capital dynamics are described by a parabolic partial differential equation. The application of the maximum principle leads to necessary but non-sufficient first-order conditions. Thanks to the linearity of the production technology and the special spatial setting considered, the value-fonction of the problem is found explicitly, and the (unique) optimal control is identified in feedback form. Despite constant returns to capital, we prove that the spatio-temporal dynamics, induced by the willingness of the planner to give the same (detrended) consumption over space and time, lead to convergence in the level of capital across locations in the long-run.
    Keywords: Economic growth, spatial dynamics; optimal control; partial-differential equations
    Date: 2013–05
  7. By: Morgan Kelly (University College Dublin); Cormac O Grada (University College Dublin)
    Abstract: Sustained economic growth in England can be traced back to the early seventeenth century. That earlier growth, albeit modest, both generated and was sustained by a demographic regime that entailed relatively high wages, and by an increasing endowment of human capital in the form of a relatively adaptable and skilled labour force. Healthier and savvier English workers were better equipped to profit from the technological possibilities available to them, and to build on them. Technological change and economic growth stemmed from such human capital rather than Boserupian forces. They were the product of England’s resource endowment and its institutions.
    Keywords: economic history,industrial revolution
    Date: 2014
  8. By: Antoine Le Riche (Aix-Marseille University (Aix-Marseille School of Economics), GREQAM, CNRS & EHESS)
    Abstract: This chapter analyzes the effect of international trade on the local stability properties of economies in a Heckscher-Ohlin free-trade equilibrium. We formulate a two-factor (capital and labor), two-good (consumption and investment), two-country overlapping generations model where countries only differ with respect to their discount rate. We consider a CES non increasing returns to scale technology in the consumption good sector and a Leontief constant returns to scale technology in the investment good sector. In the autarky equilibrium and the free-trade equilibrium, we show the existence of endogenous cycles with dynamic efficiency when the consumption good is capital intensive, the value of the elasticity of intertemporal substitution in consumption is intermediate and the degree of returns to scale is sufficiently high. Finally using a numerical simulation, we show that period-two cycles can occur in the free-trade equilibrium although one country is characterized by saddle-point stability in the autarky equilibrium.
    Keywords: Two-sector OLG model, two-country, local indeterminacy, Endogenous fluctuations, dynamic efficiency
    JEL: C62 E32 F11 F43 O41
    Date: 2014–11
  9. By: Cavalcanti Ferreira, Pedro (EPGE/FGV); Monge-Naranjo, Alexander (Federal Reserve Bank of St. Louis); Torres de Mello Pereira, Luciene (EPGE/FGV)
    Abstract: This article studies the impact of education and fertility in structural transformation and growth. In the model there are three sectors, agriculture, which uses only low-skill labor, manufacturing, that uses high-skill labor only and services, that uses both. Parents choose optimally the number of children and their skill. Educational policy has two dimensions, it may or may not allow child labor and it subsidizes education expenditures. The model is calibrated to South Korea and Brazil, and is able to reproduce some key stylized facts observed between 1960 and 2005 in these economies, such as the low (high) productivity of services in Brazil (South Korea) which is shown to be a function of human capital and very important in explaining its stagnation (growth) after 1980. We also analyze how different government policies towards education and child labor implemented in these countries affected individuals’ decisions toward education and the growth trajectory of each economy.
    Keywords: economic growth; structural transformation; education; fertility
    JEL: J13 J24 O40 O41 O47 O57
    Date: 2014–10–29
  10. By: José Afonso Mendes (Faculdade de Economia, Universidade do Porto); Sandra T. Silva (Faculdade de Economia, Universidade do Porto, CEF.UP); Ester G. Silva (Faculdade de Letras, Universidade do Porto, Instituto de Sociologia, CEF.UP)
    Abstract: After a period of convergence where many perceived the country as a success case, Portugal’s economic performance proved to be disappointing in the last decade. In this study we focus on the relationship between technology and economic catching-up in order to answer to two major questions: (i) Has the technological structure of the Portuguese economy been an obstacle for catching up? (ii) What was the role played by the inefficient use of the available resources? Using Data Envelopment Analysis (DEA), we show that over the last few decades the efficiency level of Portugal relative to a sample of 19 OECD countries fell sharply, which resulted in a divergent pattern of the Portuguese economy relative to the technological frontier.
    Keywords: Economic growth; Catching-up, Technology, Structural Change, Innovation
    JEL: O3 O43 L16
    Date: 2014–10
  11. By: Gehringer, Agnieszka; Prettner, Klaus
    Abstract: We analyze the impact of increasing longevity on technological progress within an R&D-based endogenous growth framework and test the model's implications on OECD data from 1960 to 2011. The central hypothesis derived in the theoretical part is that - by raising the incentives of households to invest in physical capital and in R&D - decreasing mortality positively impacts upon technological progress and thereby also on productivity growth. The empirical results clearly confirm the theoretical prediction which implies that the ongoing demographic changes in industrialized economies are not necessarily detrimental to economic prosperity, at least as far as technological progress and productivity growth are concerned.
    Keywords: Demographic Change,Longevity,Productivity,Technological Progress,Economic Prosperity
    JEL: J11 O11 O40 O41
    Date: 2014
  12. By: Ward, Michael R.; Zheng, Shilin
    Abstract: We contribute to the role of telecommunications infrastructure on economic growth in three ways. We separately examine fixed-line and mobile telephone subscription levels. We compare results across periods and regions that differ by the level of development. In addition, we develop a method designed to address endogeneity of telecommunications with respect to growth. We find that mobile services contribute much more to growth but that the effect diminishes as the provincial economy develops more.
    Keywords: Growth,Mobile Phone,China
    JEL: O4 L96
    Date: 2014
  13. By: Jamal, Haroon
    Abstract: This research assesses the distributional characteristics of growth in Pakistan by applying statistical techniques suggested in the empirical literature on poverty and income inequality. An attempt is also made to determine the relative contribution of economic growth and distribution of income to changes in poverty. Various episodes of growth are considered during the period 1988-2011. The findings of the research will facilitate policy makers to evaluate growth strategies in terms of pro-poorness or growth with equity.
    Keywords: Poverty Decomposition, Income Inequality, Pro-Poor Growth, Pakistan
    JEL: D31 D63 I32
    Date: 2014–11
  14. By: Voosholz, Frauke
    Abstract: In this paper we discuss the influence of using different production functions on modeling the resource extraction rates and economic growth. The focus is set on the modeling of the production sector, which requires either non-renewable resources, renewable resources or a combination of both resources for production. There are great differences between the possible assumptions when modeling the substitution process between the different input factors. It is shown that the existence of an optimal extraction rate in conjunction with economic growth depends on the specification of the production function even if the same parameterization is used. The target is to provide an overview on the different possibilities of modeling, and to support the decision which kind of production function should be used for modeling different aspects of economic growth.
    Keywords: economic growth,natural resources,production function
    JEL: E23 O13 O41 O40 Q20 Q32
    Date: 2014
  15. By: Dirk Van Damme
    Abstract: A country’s level of human capital – the knowledge and skills in the population – has a strong bearing on its economic potential for growth and prosperity. On the other hand, its level of social inequality might prevent prosperity to be shared in equitable ways across the population. This papers looks at the relationship between the distribution of numeracy skills in the population to measures of economic prosperity (per capita GDP) and social inequality (Gini coefficient). Country-level correlations between various measures of the skills dispersion and these two indicators are presented. The correlations suggest that a higher numeracy skills dispersion is related to higher social inequality. A higher share of low-skilled adults relates positively with greater social inequality, while a higher share of high-skilled adults seems to be related with higher levels of economic output.<BR>Le niveau du capital humain dans un pays - les connaissances et les compétences de la population - a une forte influence sur son potentiel de croissance économique et sa prospérité. D'autre part, son niveau d'inégalité sociale pourrait empêcher le partage équitable de la richesse entre tous les groupes de la population. Ce papier se penche sur la relation entre d’une part la répartition des compétences en numératie de la population, et d’autre part des mesures de prospérité économique (PIB par habitant) et d’inégalités sociales (coefficient de Gini). Les corrélations au niveau des pays entre les différentes mesures de la dispersion des compétences et ces deux indicateurs sont présentés. Ces corrélations suggèrent qu’une dispersion plus élevée des compétences en numératie est liée à un niveau d'inégalité sociale plus élevé. Une proportion plus élevée d'adultes peu qualifiés est associée positivement à une plus grande inégalité sociale, tandis qu'un pourcentage plus important d’adultes hautement qualifiés semble être lié à des niveaux plus élevés de production économique.
    Date: 2014–10–17
  16. By: Attar, M. Aykut
    Abstract: This paper constructs a two-sector unified growth model that explains the timing and the inevitability of an industrial revolution through entrepreneurs' role for the accumulation of useful knowledge. While learning-by-doing in agriculture eventually allows the preindustrial economy to leave its Malthusian trap, an industrial revolution is delayed as entrepreneurs of the manufacturing sector do not attempt invention if not much is known about natural phenomena. On the other hand, these entrepreneurs, as managers, serendipitously identify new useful discoveries in all times, and an industrial revolution inevitably starts at some time. The industrial revolution leads the economy to modern growth, the share of the agricultural sector declines, and the demographic transition is completed with a stabilizing level of population in the very long run. Several factors affect the timing of the industrial revolution in expected directions, but some factors that affect the optimal choice of fertility have ambiguous effects. The analysis almost completely characterizes the equilibrium path from ancient times to the infinite future, and the model economy successfully captures the qualitative aspects of the unified growth experience of England.
    Keywords: unified growth theory,useful knowledge,industrial enlightenment,demographic transition,endogenous technological change
    JEL: O31 O33 O41 J13 N33
    Date: 2014
  17. By: Mark SetterfieldY; Yun K. Kim
    Abstract: We develop a neo-Kaleckian growth model that emphasizes the importance of consumption behavior. In our model, workers first make consumption decisions based on their gross income, and then treat debt servicing commitments as a substitute for saving. Workers' borrowing is induced by their desire to keep up with the consumption standard set by rentiers' consumption, reflecting an aspect of the relative income hypothesis. As a result of this consumption and debt servicing behavior, consumer debt accumulation and income distribution have effects on aggregate demand, profitability, and economic growth that differ from those found in existing models. We also investigate the financial sustainability of the Golden Age and Neoliberal growth regimes within our framework. It is shown that distributional changes between the Golden Age and the Neoliberal regimes, together with corresponding changes in consumption emulation behavior via expenditure cascades, suffice to make the Neoliberal growth regime unsustainabble.
    Keywords: Consumer debt, emulation, income distribution, Golden Age regime, Neoliberal regime, expenditure cascades, growth
    JEL: E12 E44 O41
    Date: 2014–11
  18. By: Bresson G.; Etienne J.; Mohnen P. (UNU-MERIT)
    Abstract: This paper proposes a Bayesian approach to estimate a factor augmented productivity equation. We exploit the panel dimension of our data and distinguish individual-specific and time-specific factors. On the basis of 21 technology, infrastructure and institution indicators from 82 countries over a 19-year period 1990 to 2008, we construct summary indicators of these three components and estimate their effect on the growth and the international differences in GDP per capita.
    Keywords: Single Equation Models; Single Variables: Models with Panel Data; Longitudinal Data; Spatial Time Series; Multiple or Simultaneous Equation Models: Classification Methods; Cluster Analysis; Factor Models; Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence;
    JEL: C23 C38 O47
    Date: 2014
  19. By: Nikoloz Gigineishvili; Paolo Mauro; Ke Wang
    Abstract: Is rapid economic growth experienced by the East African Community during the past decade built on solid foundations? To gain some clues, we use a variety of newly-collected and existing data sources to analyze the structural transformation of output and exports, as well as indicators of their quality and sophistication. The move from agriculture to a wide range of other sectors—bodes well for continued growth, as do gradual improvements in quality. Yet, no clear winners on the production side seem to have emerged, to embed a durable comparative advantage in international markets. These observations may instill a note of caution against projecting rapid growth into the distant future.
    Keywords: Economic growth;East Africa;Production;Exports;Regional economics;Cross country analysis;Structural transformation, Burundi, Kenya, Rwanda, Tanzania, Uganda.
    Date: 2014–08–12

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