nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒12‒13
seventeen papers chosen by
Marc Klemp
Brown University

  1. Financial Development and Technology Diffusion By Diego Comin; Ramana Nanda
  2. Isolated Capital Cities, Accountability and Corruption: Evidence from US States By Campante, Filipe Robin; Do, Quoc-Anh
  3. Fertility in the absence of self-control By Bertrand Wigniolle
  4. Gender equity and the escape from poverty By Prettner, Klaus; Strulik, Holger
  5. Happiness matters: the role of well-being in productivity By Charles Henri DiMaria; Chiara Peroni; Francesco Sarracino
  6. Education and growth with learning by doing By Marconi G.; Grip A. de
  7. The Effects of Climate Changes on Brazilian Agricultural Production – A Multisector Growth Model Analysis By Spolador, Humberto F.S.; Smith, Rodney B.W.
  8. Economic inequality and growth before the industrial revolution: A case study of the Low Countries (14th-19th centuries) By Wouter Ryckbosch
  9. Sovereign Debt and Economic Growth Revisited: The Role of (Non-)Sustainable Debt Thresholds By Nikolaos Antonakakis
  10. A DYNAMICAL SYSTEMS APPROACH TO MODELING HUMAN DEVELOPMENT By Ranganathan, Shyam; Bali Swain, Ranjula; Sumpter, David
  11. Transitioning from low-income growth to high-income growth : is there a middle income trap ? By Bulman, David; Eden, Maya; Nguyen, Ha
  12. Financial Integration and Growth: A Nonlinear Panel Data Analysis By Duygu Yolcu Karadam; Nadir Ocal
  13. The Dynamic Implication of Agricultural Research and Development Investment for Economic Development By Didier, Y. Alia; Reed, Michael R.
  14. The Impact of 'Clean Innovation' on Economic Growth: Evidence from the Transport and Energy Industries' By Ralf Martin
  15. Commodity Price Shocks, Conflict and Growth: The Role of Institutional Quality and Political Violence By Musayev, Vusal
  16. Existence of equilibrium in OLG economies with durable goods By Lalaina Rakotonindrainy
  17. Deflation and Economic Growth in Long-Term Perspective By Pavel Ryska

  1. By: Diego Comin (Dartmouth College); Ramana Nanda (Harvard Business School, Entrepreneurial Management Unit)
    Abstract: We examine the extent to which financial market development impacts the diffusion of 16 major technologies, looking across 55 countries, from 1870 to 2000. We find that greater depth in financial markets leads to faster technology diffusion for more capital-intensive technologies, but only in periods closer to the invention of the technology. In fact, we find no differential effect of financial depth on the diffusion of capital-intensive technologies in the late stages of diffusion or in late adopters. Our results are consistent with a view that local financial markets play a critical role in facilitating the process of experimentation that is required for the initial commercialization of technologies. This evidence also points to an important mechanism relating financial market development to technology diffusion and economic growth.
    Keywords: banking, technology diffusion, experimentation, growth.
    Date: 2014–10
  2. By: Campante, Filipe Robin; Do, Quoc-Anh
    Abstract: We show that isolated capital cities are robustly associated with greater levels of corruption across US states, in line with the view that this isolation reduces accountability. We then provide direct evidence that the spatial distribution of population relative to the capital affects different accountability mechanisms: newspapers cover state politics more when readers are closer to the capital, voters who live far from the capital are less knowledgeable and interested in state politics, and they turn out less in state elections. We also find that isolated capitals are associated with more money in state-level campaigns, and worse public good provision.
    Date: 2014
  3. By: 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 studies the quantity-quality trade-off model of fertility, under the assumption of hyperbolic discounting. It shows that the lack of self-control may play a different role in a developed economy and in a developing one. In the first case, characterized by a positive investment in quality, the lack of self-control may tend to reduce fertility. In the second case, it is possible that the lack of self-control leads to both no investment in quality and a higher fertility rate. It is also proved that if parents cannot commit on their investment in quality, a small change of parameters may lead to a jump in fertility and education.
    Keywords: endogenous fertility; quasi-hyperbolic discounting
    Date: 2013–07
  4. By: Prettner, Klaus; Strulik, Holger
    Abstract: We set up a unified growth model with gender-specific differences in tastes for consumption, fertility, education of daughters and sons, and consider the intra-household bargaining power of spouses. In line with the empirical regularity for less developed countries, we assume that mothers desire to have no more children than fathers and to invest no less in education per child. We then show that female empowerment has the potential to promote the transition from a state of high fertility, low education, and sluggish economic growth towards a state of low fertility, high education, and fast economic growth if the child quantity-quality preferences of spouses differ substantially. In this case targeted policies to empower women have the potential to constitute a successful development strategy. We demonstrate the robustness of this finding with respect to endogenously evolving bargaining power and division of child-rearing time within the household.
    Keywords: female empowerment,intra-household bargaining,fertility transition,education,economic growth
    JEL: J13 J16 O11 O41
    Date: 2014
  5. By: Charles Henri DiMaria; Chiara Peroni; Francesco Sarracino
    Abstract: This article is about the link between people’s subjective well-being, defined as an evaluation of one’s own life, and productivity. Our aim is to test the hypothesis that subjective well-being contributes to productivity using a two step approach: first, we establish whether subjectivewell-being can be a candidate variable to study Total Factor Productivity; second, we assess how much subjective well-being contributes to productivity at aggregate level through efficiency gains. We adopt Data Envelopment Analysis to compute total factor productivity and efficiency indices using European Social Survey and AMECO data for 20 European countries. Results show that subjective well-being is an input and not an output to production.
    Keywords: productivity, subjective well-being, TFP, efficiency gains, life satisfaction, economic growth, DEA.
    JEL: E23 I31 O47
    Date: 2014–06
  6. By: Marconi G.; Grip A. de (GSBE)
    Abstract: In this paper, we develop a general equilibrium overlapping generations model which is based on the view that education makes workers more productive by increasing their ability to learn from work experience, rather than providing skills that directly increase productivity. This assumption is discussed and compared with the dominant Mincerian view on the education-productivity relationship. One important implication of the model is that the enrolment rate to education has a negative effect on the GDP in the medium term and a positive effect in the long term. This could be an explanation for the weak empirical relationship between education and economic growth that has been found in the empirical macroeconomic literature. Conversely, for a given enrolment rate, the quality of education, as measured by work
    Keywords: Human Capital; Skills; Occupational Choice; Labor Productivity; Macroeconomic Analyses of Economic Development; One, Two, and Multisector Growth Models;
    JEL: J24 O11 O41
    Date: 2014
  7. By: Spolador, Humberto F.S.; Smith, Rodney B.W.
    Abstract: This paper develops a multisector growth model to examine the potential effects of climate change and Brazilian agriculture. In keeping with the current literature, the model assumes climate (here temperature and rainfall) affects agricultural output via its impact on total factor productivity (TFP). We begin by estimating an aggregate agricultural technology for Brazil, with econometric results suggesting a strong relationship exists between rainfall, temperature and agricultural TFP. We then introduce the climate effects into a dynamic multisector growth model of Brazil. Model results suggest climate change could have a negative impact on agriculture, but benefit manufacturing, with long run agricultural output per unit of labor being less than half of agricultural output per worker in a no climate change world.
    Keywords: Climate Changes, agricultural growth, multisector growth model, Environmental Economics and Policy, Productivity Analysis, O10, O11, Q1,
    Date: 2014–05
  8. By: Wouter Ryckbosch
    Abstract: This paper studies a collection of data on economic inequality in fifteen towns in the Southern and Northern Low Countries from the late Middle Ages until the end of the nineteenth century. By using a single and consistent source type and adopting a uniform methodology, it is possible to study levels of urban economic inequality across time and place comparatively. The results indicate a clear growth in economic inequality in the two centuries prior to the industrial revolution and the onset of sustained economic growth per capita. The general occurrence of this rise throughout regions with dissimilar economic trajectories contradicts the existence of a straightforward trade-off between growth and inequality as conjectured by Simon Kuznets (1955). Instead, the results presented lend support to the ÔclassicalÕ economistsÕ explanation of inequality as the consequence of a changing functional distribution of income favouring capital over labour in the long run.
    Keywords: Income Inequality, Pre-Industrial, Economic Growth, super Kuznets curve.
    Date: 2014–11
  9. By: Nikolaos Antonakakis (Department of Economics, Vienna University of Economics and Business)
    Abstract: Contributing to the contentious debate on the relationship between sovereign debt and economic growth, I examine the role of theory-driven (non-)sustainable debt-ratios in combination with debt-ratio thresholds on economic growth. Based on both dynamic and non-dynamic panel data analyses in the euro area (EA) 12 countries over the period 1970-2013, I find that non-sustainable debt-ratios above and below the 60% threshold, have a detrimental effect on short-run economic growth, while sustainable debt-ratios below the 90% threshold exert a positive influence on short-run economic growth. In the long-run, both non-sustainable and sustainable debt-ratios above the 90% threshold, as well as non-sustainable debt-ratios below the 60% compromise economic growth. Robustness analysis supports these findings, and provides additional evidence of a positive effect of sustainable debt-ratios below the 60% threshold, as predicated by the Maastricht Treaty criterion, on (short- and long-run) economic growth. Overall, these results suggest that debt sustainability in addition to debt non-linearities should be considered simultaneously in the debt-growth nexus. In addition, the results indicate the importance of a timely reaction of fiscal policy in countries with non-sustainable debts, as implied by fiscal rules, in an attempt to ensure fiscal sustainability and, ultimately, promote long-run economic growth.
    Keywords: Government debt, growth, sustainability, threshold, government budget constraint
    JEL: C23 E62 F43 H63 O40
    Date: 2014–10
  10. By: Ranganathan, Shyam (Department of Mathematics); Bali Swain, Ranjula (Department of Economics); Sumpter, David (Department of Mathematics)
    Abstract: A key aim of economics is to set goals and investigate the relationship between various socio-economic indicators. By tting time series data using a Bayesian dynamical systems approach we identify non-linear interactions between GDP, child mortality, fertility rate and female education. We show that reduction in child mortality is best predicted by the level of GDP in a country over the preceding 5 years. Fertility rate decreases when current or predicted child mortality is low, and is weakly dependent on female education and economic growth. As fertility drops, GDP increases producing a cycle that drives the demographic transition.
    Keywords: Demographic transition; Human Development; dynamical systems; Bayesian; data-driven; GDP; child mortality; fertility rate
    JEL: C51 C52 C53 C61 J13 O21
    Date: 2014–10–31
  11. By: Bulman, David; Eden, Maya; Nguyen, Ha
    Abstract: Is there a"middle income trap"? Theory suggests that the determinants of growth at low and high income levels may be different. If countries struggle to transition from growth strategies that are effective at low income levels to growth strategies that are effective at high income levels, they may stagnate at some middle income level; this phenomenon can be thought of as a"middle income trap."This paper does not find evidence for (unusual) stagnation at any particular middle income level. However, it does find evidence that the determinants of growth at low and high income levels differ. These findings suggest a mixed conclusion: middle-income countries may need to change growth strategies to transition smoothly to high-income growth strategies, but this can be done smoothly and does not imply the existence of a middle income trap.
    Keywords: Income,Economic Theory&Research,Inequality,Emerging Markets,Fiscal&Monetary Policy
    Date: 2014–11–01
  12. By: Duygu Yolcu Karadam (Department of Economics, METU); Nadir Ocal (Department of Economics, METU)
    Abstract: This paper employs Panel Smooth Transition Models (PSTR) to examine the financial integration and economic growth relationship for a large panel data set consisting of 82 countries and for three subsamples, namely emerging, industrial, and developing countries, for 1970-2010 periods. Unlike linear specifications with interaction terms, PSTR models are flexible enough to endogenously determine how the degree of institutional quality, financial sector development, trade openness, budget deficit, inflation volatility and financial integration can have a role in revealing asymmetries in financial integration-growth nexus. Except developing countries, empirical results strongly indicate nonlinear dynamics and imply that the impact of financial integration on growth is asymmetric depending on the threshold effects of these variables which show great variation not only from variable to variable but also for different country groups. As far as whole set of countries is concerned, our findings imply that countries having developed financial systems, qualified institutions and stable macroeconomic environment seem to be benefiting from financial integration. Moreover, nonlinear threshold effects are more apparent and different for emerging countries compared to the industrial countries. Unlike former economies, higher levels of financial integration and trade openness decrease benefits from financial openness for the industrial countries. Besides, high fiscal deficit has more pronounced negative effect on the growth of the industrialized countries compared to emerging economies and other indicators.
    Keywords: : Financial Integration, Economic Growth, Panel Smooth Transition Models, Nonlinearity.
    JEL: F41 F43 O40 F4 C23
    Date: 2014–11
  13. By: Didier, Y. Alia; Reed, Michael R.
    Abstract: This paper presents some evidence of a positive effect of Agriculture R&D investment on economic growth in general dynamic setting using annual data for 57 developing countries for the period 1981-2010. The potential endogeneity of Research and Development Investment is also addressed to identify causal effect using GMM Style internal instrument that successfully pass various validity tests. Our analysis separates the growth effect and the level effect of R&D investment. The result appears to be robust to various proxies for Agriculture R&D investment. The finding suggests the intensification of investment in research and development in developing countries to boost agricultural productivity and economic growth.
    Keywords: Research and Development, Agriculture, Economic Growth, International Development, Research and Development/Tech Change/Emerging Technologies,
    Date: 2014–05
  14. By: Ralf Martin
    Abstract: Policies on climate change that encourage 'clean innovation' while displacing 'dirty innovation' could have a positive impact on short-term economic growth while avoiding the potentially disastrous reduction in GDP that could result from climate change over the longer term.
    Keywords: Innovation spill-overs, Climate Change, Growth, Patents, Clean technology, Optimal climate policy
    JEL: O30 O44 Q54 Q55 Q58 H23
    Date: 2014–11
  15. By: Musayev, Vusal
    Abstract: This analysis empirically investigates the relationships between resource windfalls, political regimes, conflict and economic growth using recent advances in panel estimation methods and a distinctive commodity price shock measurement. The paper clarifies many of the ambiguous outcomes of the existing literature, particularly showing that resource windfalls have significant impact on conflict only in politically unstable autocracies, which itself is heterogeneous in the response conditional on a country’s initial political violence level. The findings also demonstrate that resource shocks are positively associated with economic performance in democracies and in politically stable autocracies, while significantly deteriorating growth for politically unstable autocracies.
    Keywords: Commodity Price Shocks; Economic Growth; Political Regimes; Conflict; Political Violence.
    JEL: H56 O43 Q34
    Date: 2014–04
  16. By: Lalaina Rakotonindrainy (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: We consider a standard pure exchange overlapping generations economy. The demographic structure consists of a new cohort of agents at each period with an economic activity extended over two successive periods. Our model incorporates durable goods that may be stored from one period to a successive period through a linear technology. In this model, we intend to study the mechanism of transfer between generations, and we show that the existence of an equilibrium can be established by considering an equivalent economy "without" durable goods, where the agents economic activity is extended over three successive periods.
    Keywords: Overlapping generations model; durable goods; irreducibility; equilibrium; existence
    Date: 2014–05
  17. By: Pavel Ryska (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic)
    Abstract: This paper deals with the relationship between deflation and economic growth. Although there are numerous theories on the potential effects of deflation on real output, empirical evidence in this field is still scarce and partial. In order to explore the relationship between prices and output in a more comprehensive way, I use a large panel data set of 19 countries over roughly 150 years, which contains frequent deflationary episodes. I employ the fixed effects model to look at both contemporaneous and lagged correlation between prices and output, and I include control variables to remove potential bias. There are several important results. First, there is no general relationship between prices and output. The lagged negative effect of deflation on output growth, alleged by some authors, disappears after adding a control variable. Second, monetary regimes seem to affect the relationship. Deflation appears to become associated with output slightly negatively with the advent of the fiat money system, while it was benign under the classical gold standard. Third, well-known episodes of deflation differ a lot. The Great Depression is the only period where deflation seems to be strongly associated with recession. By contrast, Japan in the 1990s and 2000s bears no resemblence to it. Here, both empirically and theoretically, deflation is highly unlikely to have caused economic stagnation.
    Keywords: deflation; price level; economic growth; monetary systems; panel data; economic history
    JEL: E31 E42 C33 N10
    Date: 2014–05

This nep-gro issue is ©2014 by Marc Klemp. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.