nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒12‒24
nineteen papers chosen by
Marc Klemp
Brown University

  1. Structural transformation in the 20th century: A new database on agricultural employment around the world By Asger Moll Wingender
  2. The Heavy Plough and the Agricultural Revolution in Medieval Europe By Thomas Barnebeck Andersen; Thomas Peter Sandholt Jensen; Christian Volmer Skovsgaard
  3. Sailing away from Malthus: intercontinental trade and European economic growth, 1500-1800 By Nuno Palma
  4. Natural disasters and macroeconomic performance: The role of residential investment By Strulik, Holger; Trimborn, Timo
  5. Financial Development and Technology Diffusion By Comin, Diego; Nanda, Ramana
  6. An African Growth Miracle? By Rodrik, Dani
  7. Chinese National Income, ca. 1661-1933 By Shi Zhihong; Xuyi; Ni Yuping; Bas van Leeuwen
  8. Stochastic stability of endogenous growth: The AK case By Raouf Boucekkine; Benteng Zou
  9. New evidence on income distribution and economic growth in Japan By Masako Oyama
  10. Does ethnic diversity decrease economic interactions? Evidence from exchange networks in rural Gambia By Arcand, Jean-Louis; Jaimovich, Dany
  11. Health Expenditure, education and Economic Growth in MENA Countries By Lacheheb, Miloud; Med Nor, Norashidah; Baloch, Imdadullah
  12. Explaining Differences in the Productivity of Capital Across Countries in the Context of 'New' Growth Theory By Kevin S. Nell; A.P. Thirlwall
  13. Demographic transition and political stability: Does corruption matter? By Mohammad Reza Farzanegan; Stefan Witthuhn
  14. Positional Preferences, Endogenous Growth, and Optimal Income- and Consumption Taxation By Ghosh, Sugata; Wendner, Ronald
  15. Positional Preferences, Endogenous Growth, and Optimal Income- and Consumption Taxation By Sugata Ghosh; Ronald Wendner
  16. Mismeasuring Long Run Growth. The Bias from Spliced National Accounts By Leandro Prados de la Escosura
  17. How significant is Africa's demographic dividend for its future growth and poverty reduction ? By Ahmed, S. Amer; Cruz, Marcio; Go, Delfin S.; Maliszewska, Maryla; Osorio-Rodarte, Israel
  18. The Short- and Long-Run Damages of Fiscal Austerity: Keynes beyond Schumpeter By Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Tania Treibich
  19. Growth, poverty and inequality in Rwanda: A broad perspective By Verpoorten, Marijke

  1. By: Asger Moll Wingender (Department of Economics, Copenhagen University)
    Abstract: Many empirical questions about economic growth and development are left open due to the lack of long time series of reliable GDP estimates. The share of the labor force employed in agriculture can fill this gap. Agricultural employment shares are highly correlated with GDP per capita, less prone to measurement errors, and data are available for longer periods than existing GDP estimates. This paper describes a new database on agricultural employment covering 169 countries for the period 1900-2010. Some of the many potential uses of the data are discussed.
    Keywords: Economic growth, structural transformation, agricultural employment
    JEL: O1 O4
    Date: 2014–12–01
  2. By: Thomas Barnebeck Andersen (University of Southern Denmark); Thomas Peter Sandholt Jensen (University of Southern Denmark); Christian Volmer Skovsgaard (University of Southern Denmark)
    Abstract: This research tests the long-standing hypothesis put forth by Lynn White, Jr. (1962) that the adoption of the heavy plough in Northern Europe was an important cause of economic development. White argued that it was impossible to take proper advantage of the fertile clay soils of Northern Europe prior to the invention and widespread adoption of the heavy plough. We implement the test in a difference-in-difference set-up by exploiting regional variation in the presence of fertile clay soils. Using a high quality dataset for Denmark, we find that historical counties with relatively more fertile clay soil experienced higher urbanization after the heavy plough had its breakthrough, which was around AD 1000. We obtain a similar result, when we extend the test to European regions
    Keywords: Heavy plough, medieval technology, agricultural productivity
    JEL: J1 N1 N93 O1 O33
    Date: 2014–12
  3. By: Nuno Palma
    Abstract: What was the contribution of intercontinental trade to the development of the European early modern economies? Previous attempts to answer this question have focused on static measures of the weight of trade in the aggregate economy at a given point in time, or on the comparison of the income of specific imperial nations just before and after the loss of their overseas empire. These static accounting approaches are inappropriate if dynamic and spillover effects are at work, as seems likely. In this paper I use a panel dataset of ten countries in a dynamic model which allows for spillover effects, multiple channels of causality, persistence and country-specific fixed effects. Using this dynamic model, simulations suggest that in the counterfactual absence of intercontinental trade, rates of early modern economic growth and urbanization would have been moderately to substantially lower. For the four main long-distance traders, by 1800 the real wage was, depending on the country, 6.1 to 22.7% higher, and urbanization was 4.0 to 11.7 percentage points higher, than they would have otherwise been. For some countries, the effect was quite pronounced: in the Netherlands between 1600 and 1750, for instance, intercontinental trade was responsible for most of the observed increase in real wages and for a large share of the observed increase in urbanization. At the same time, countries which did not engage in long-distance trade would have had real wage increases in the order of 5.4 to 17.8% and urbanization increases of 2.2 to 3.2 percentage points, should they have done so at the same level as the four main traders. Intercontinental trade appears to have played an important role for all nations which engaged in it, with the exception of France. These conclusions stand in contrast with the earlier literature which uses a partial equilibrium and static accounting approach.
    Keywords: early modern economic growth; economics of empires
    JEL: O52
    Date: 2014–09
  4. By: Strulik, Holger; Trimborn, Timo
    Abstract: Recent empirical research has shown that income per capita in the aftermath of natural disasters is not necessarily lower than before the event. In many cases, income is not significantly affected and surprisingly, can even respond positively to natural disasters. Here, we propose a simple theory based on the neoclassical growth model that explains these observations. Specifically, we show that GDP is driven above its pre-shock level when natural disasters destroy predominantly residential housing (or other durable goods). Disasters destroying mainly productive capital, in contrast, are predicted to reduce GDP. Insignificant responses of GDP can be expected when disasters destroy about equally residential structures and productive capital. We also show that disasters, irrespective of whether their impact on GDP is positive, negative, or insignificant, entail considerable losses of aggregate welfare.
    Keywords: natural disasters,economic recovery,residential housing,economic growth
    JEL: E20 O40 Q54 R31
    Date: 2014
  5. By: Comin, Diego; Nanda, Ramana
    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; experimentation; growth; technology diffusion
    Date: 2014–11
  6. By: Rodrik, Dani
    Abstract: Africa’s recent growth performance has raised expectations of a bright economic future for the continent after decades of decline. Yet there is a genuine question about whether Africa’s growth can be sustained, and if so, at what level. The balance of the evidence suggests caution on the prospects for high growth. While the region’s fundamentals have improved, the payoffs to macroeconomic stability and improved governance are mainly to foster resilience and lay the groundwork for growth, rather than to generate productivity growth on their own. The traditional engines behind rapid growth, structural change and industrialization, seem to be operating at less than full power. If African countries do achieve growth rates substantially higher, they will have to do so pursuing a growth model that is different from earlier miracles based on industrialization. This might be agriculture-led or services-led growth, but it will look quite different than what we have seen before.
    Keywords: Africa; economic growth
    JEL: O11 O55
    Date: 2014–06
  7. By: Shi Zhihong; Xuyi; Ni Yuping; Bas van Leeuwen
    Abstract: This paper pulls together many primary and secondary sources to arrive at consistent estimates of national income for china between the 17th and 20th centuries. We find, in line with much of the literature, that GDP per capita declined between the mid-17th and 19th centuries. This trend reversed during the 19th century, mainly due to a shift into services and, for the late 19th century onwards, also in industry. Since these sectors exhibited higher labour productivity, this fostered economic growth. This pattern of decreasing share of services and industry from the 17th century and increasing shares in the 19th century is common in many Asian countries except Japan. The reasons for this development, however, are unclear. The standard ultimate factors of growth such as institutions (low marriage age for women, exclusive society) and geography apply to almost all Asian countries. Hence, more research is necessary.
    Keywords: GDP, agriculture, industry, services, growth, China, economic history
    Date: 2014–12
  8. By: Raouf Boucekkine (GREQAM, Aix Marseille University); Benteng Zou (CREA, Université de Luxembourg)
    Abstract: This note studies the stochastic stability of the standard AK growth model un- der uncertain output technology. Capital accumulation follows a stochastic lin- ear homogenous differential equation. It’s shown that exponential balanced paths, which characterize optimal trajectories in the absence of uncertainty, are not robust to uncertainty. Precisely, it’s demonstrated that the economy almost surely col- lapses at exponential speed even though productivity is initially arbitrarily high.
    Keywords: Optimal growth, AK model, Ito stochastic differential equation, balanced growth paths, stochastic stability
    JEL: O40 C61 C62
    Date: 2014
  9. By: Masako Oyama
    Abstract: There have been many theoretical and empirical researches on the effects of income distribution on economic growth. This paper uses Japanese prefectural panel data to empirically analyze how income distribution affects economic growth. Four measures of the income distribution are used in the system GMM estimations. The Gini indices, income share of the third quintile and the ratio of the income share of the top decile and the 5th decile show that income inequality has negative effects on growth. The ratio of the income share of the bottom decile and the 5th decile does not have statistically significant effects. Therefore, the estimation results show that the increased income inequality in recent Japan decreased the economic growth.
    Date: 2014–12
  10. By: Arcand, Jean-Louis; Jaimovich, Dany
    Abstract: Using a unique dataset collected in 59 rural Gambian villages, we study how ethnic heterogeneity is related to the structure of four economic exchange networks: land, labor, inputs and credit. We find that different measures of village-level ethnic fragmentation are mostly uncorrelated with network structure. At a more disaggregated level, household heads belonging to ethnic minorities are not less central than those from the predominant ethnicity in any of the networks and, at the dyadic level, the fact that two households share ethnicity is not an economically significant predictor of link formation. Our results indicate that, in the particular setting of our study, the structure of the exchange networks is better defined by other variables than ethnicity, and that ethnic heterogeneity is unlikely to be a driver for sub-optimal economic exchanges. We argue that our findings can be interpreted in a causal way as the current distribution of ethnic groups in rural Gambia is largely influenced by specific historical features of the British colonial administration. Moreover, the network structure of our data allow us to include fixed effects at different levels as well as to precisely measure kinship ties, a confounding variable often omitted in previous studies.
    Keywords: Keywords: West Africa, Social Networks, Ethnic Fragmentation. JEL codes: C31, D04, 012, Z13.
    JEL: C31 O1 O12 Z13
    Date: 2014
  11. By: Lacheheb, Miloud; Med Nor, Norashidah; Baloch, Imdadullah
    Abstract: This study examines the relationship between health expenditure, education and economic growth in MENA countries using panel data estimation. Our results based on random effect estimation endorse a relationship between health expenditure, education and economic growth. Data were obtained from the World Bank Development Indicators for the period of 1995 to 2010 for 20 countries from Middle East and North Africa region. Importantly, our results reveal that health expenditure and education have significantly positive effect on economic growth. Also gross fixed capital formation positively, but insignificantly, related to economic growth of MENA countries. Therefore, investment in human capital, namely health and education, will increase income in these countries.
    Keywords: Economic growth; Education; Health expenditure; MENA countries
    JEL: E61 I1 I15 I25
    Date: 2014–06–06
  12. By: Kevin S. Nell; A.P. Thirlwall
    Abstract: The purpose of this paper is to explain differences in the productivity of capital across countries taking 84 rich and poor countries over the period 1980-2011, and to test the orthodox neoclassical assumption of diminishing returns to capital. The marginal product of capital is measured as the ratio of the long-run growth of GDP to a country’s investment ratio. Twenty potential determinants are considered using a general-to-specific model selection procedure. Education, government consumption, geography, export growth, openness, political rights and macroeconomic instability turn out to be the most important variables. The data also suggest constant returns to capital, so investment matters for long-run growth.
    Keywords: new growth theory; investment; productivity of capital
    JEL: O11 O33 O43 O47
    Date: 2014–11
  13. By: Mohammad Reza Farzanegan (University of Marburg); Stefan Witthuhn (CESifo Munich)
    Abstract: A demographic transition resulting from an increase in the size of the young working age population can be a blessing or a curse for economic performance. We focus on the political stability effects of a larger youth population and hypothesize that corruption matters in this nexus. Using panel data covering the period of 2002–2012 for more than 150 countries, we find a negative interaction effect between the relative size of the youth population (17-25 years old) within the total working age population (15-64 years old) and corruption on political stability. This finding is robust, controlling for country and time fixed effects and a set of control variables that may affect stability. The negative interaction term between corruption and the youth population remains robust when we control for the persistency of political stability and the possible endogeneity of the main variables of interest through dynamic panel data estimations. Our findings shed more light on the political turmoil in the Arab world, with the so-called Arab Spring.
    Keywords: demographic transition, youth population, political stability, corruption
    JEL: D73 D74 E02 H56 J11
    Date: 2014
  14. By: Ghosh, Sugata; Wendner, Ronald
    Abstract: This paper analyzes the impact of positional preferences, exhibiting conspicuous consumption and conspicuous wealth, on optimal consumption- and income taxes, for an endogenous growth model with public capital. Positional preferences raise the endogenous growth rate if the elasticity of intertemporal substitution is larger than one. Even if labor supply is exogenous, the consumption externalities introduce distortions so long as preferences are wealth-dependent, and with or without the presence of conspicuous wealth. Consequently, optimal consumption- and income taxes differ from zero. Numerical simulations present the effects of fiscal policy on the balanced growth path and transitional dynamics.
    Keywords: Conspicuous consumption, conspicuous wealth, endogenous growth, public capital, optimal consumption tax
    JEL: D62 D91 E21 H21 O41
    Date: 2014–11–24
  15. By: Sugata Ghosh (Brunel University, London); Ronald Wendner (University of Graz)
    Abstract: This paper analyzes the impact of positional preferences, exhibiting conspicuous consumption and conspicuous wealth, on optimal consumption- and income taxes, for an endogenous growth model with public capital. Positional preferences raise the endogenous growth rate if the elasticity of intertemporal substitution is larger than one. Even if labor supply is exogenous, the consumption externalities introduce distortions so long as preferences are wealth-dependent, and with or without the presence of conspicuous wealth. Consequently, optimal consumption- and income taxes differ from zero. Numerical simulations present the effects of fiscal policy on the balanced growth path and transitional dynamics.
    Keywords: Saving rate dynamics; non-monotonic transition path; hyperbolic discounting; short-term planning; neoclassical growth model
    JEL: D91 E21 O40
    Date: 2014–11
  16. By: Leandro Prados de la Escosura (Universidad Carlos III and CEPR)
    Abstract: Comparisons of economic performance over space and time largely depend on how statistical evidence from national accounts and historical estimates are spliced. To allow for changes in relative prices, GDP benchmark years in national accounts are periodically replaced with new and more recent ones. Thus, a homogeneous long-run GDP series requires linking different temporal segments of national accounts. The choice of the splicing procedure may result in substantial differences in GDP levels and growth, particularly as an economy undergoes deep structural transformation. An inadequate splicing may result in a serious bias in the measurement of GDP levels and growth rates. Alternative splicing solutions are discussed in this paper for the particular case of Spain, a fast growing country in the second half of the twentieth century. It is concluded that the usual linking procedure, retropolation, has serious flows as it tends to bias GDP levels upwards and, consequently, to underestimate growth rates, especially for developing countries experiencing structural change. An alternative interpolation procedure is proposed.
    Keywords: growth measurement, splicing GDP, historical national accounts, Spain
    JEL: C82 E01 N13 O47
    Date: 2014–08
  17. By: Ahmed, S. Amer; Cruz, Marcio; Go, Delfin S.; Maliszewska, Maryla; Osorio-Rodarte, Israel
    Abstract: Africa will be undergoing substantial demographic changes in the coming decades with the rising working age share of its population. The opportunity of African countries to convert these changes into demographic dividends for growth and poverty reduction will depend on several factors. The outlook will likely be good if African countries can continue the gains already made under better institutions and policies, particularly those affecting the productivity of labor, such as educational outcomes. If African countries can continue to build on the hard-won development gains, the demographic dividend could account for 11 to 15 percent of gross domestic product volume growth by 2030, while accounting for 40 to 60 million fewer poor in 2030. The gains can become much more substantial with even better educational outcomes that allow African countries to catch up to other developing countries. If the skill share of Africa's labor supply doubles because of improvements in educational attainment, from 25 to about 50 percent between 2011 and 30, then the demographic dividends can expand the regional economy additionally by 22 percent by 2030 relative to the base case and reduce poverty by an additional 51 million people.
    Keywords: Achieving Shared Growth,Economic Conditions and Volatility,Economic Theory&Research,Economic Growth,Emerging Markets
    Date: 2014–12–01
  18. By: Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Tania Treibich
    Abstract: In this work we analyze the short- and long-run effects of fiscal austerity policies, employing an agent-based model populated by heterogeneous, boundedly-rational firms and banks. The model, in line with the family of "Keynes+Schumpeter" formalism, is able to account for a wide array of macro and micro empirical regularities. In particular, it endogenously generates self-sustained growth patterns together with persistent economic fluctuations punctuated by deep downturns. On the policy side, we find that austerity policies considerably harm the economy, by increasing output volatility, unemployment, and the incidence of crises. In addition, they depress innovation and the diffusion of new technologies, thus reducing long-run productivity and GDP growth. Finally, we show that "discipline-guided" fiscal rules are self-defeating, as they do not stabilize public finances, but, on the contrary, they disrupt them.
    Keywords: agent-based model, fiscal policy, economic crises, austerity policies, disequilibrium dynamics
    Date: 2014–11–25
  19. By: Verpoorten, Marijke
    Abstract: This study focuses on growth, poverty and inequality in Rwanda. We take a broad perspective, in two respects. First, we consider a long time period so as to compare the current situation with the pre-war situation, allowing us to assess whether the recent
    Keywords: Rwanda, poverty, inequality, mobility, happiness
    Date: 2014

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