nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒01‒09
twenty-one papers chosen by
Marc Klemp
Brown University

  1. Epidemic trade By Lars Boerner; Battista Severgnini
  2. Fertility and early-life mortality: Evidence from smallpox vaccination in Sweden By Philipp Ager; Casper Worm Hansen; Peter Sandholt Jensen
  3. Wealth and Inheritance in the Long Run By Piketty, Thomas; Zucman, Gabriel
  4. Causes of Growth in Transition Countries 1990-2012: Comparative Analysis By Čizmović, Mirjana; Popović, Milenko
  5. A Simple Model of Endogenous Growth with Financial Frictions and Firm Heterogeneity By Kazuo MIno
  6. Population and economic development in Sarawak, Malaysia By Furuoka, Fumitaka
  7. Essays on economic growth and international trade By Çürük, M.
  8. Innovation, Decentralization, and Planning in a Multi-Region Model of Schumpeterian Economic Growth By Amit Batabyal; Peter Nijkamp
  9. Economic Implications of Business Dynamics for KE-Associated Economic Growth and Inclusive Development in African Countries By Simplice Asongu; Voxi Amavilah; Antonio Andrés
  10. Demographic Transition and Rise of Modern Representative Democracy By Namasaka, Martin
  11. Paid Basic Income, Fertility Rates and Economic Growth By Elise S. Brezis
  12. The political economy of economic growth in India, 1993-2013 By Kunal Sen; Sabyasachi Kar; Jagadish Prasad Sahu
  13. Mismeasuring Long Run Growth. The Bias from Spliced National Accounts By Prados de la Escosura, Leandro
  14. Growth, Trade, and Inequality By Grossman, Gene; Helpman, Elhanan
  15. Following the Trend: Tracking GDP when Long-Run Growth is Uncertain By Antolin-Diaz, Juan; Drechsel, Thomas; Petrella, Ivan
  16. Essential Inputs and Unbounded Output: an Alternative Characterization of the Neoclassical Production Function By Andreas Irmen; Alfred Maußner
  17. Why did Spanish regions not converge before the Civil War? Agglomeration and (regional) growth revisited: Spain, 1870-1930 By Alfonso Díez-Minguela; Julio Martínez-Galarraga; Daniel A. Tirado Fabregat
  18. Growth under extractive institutions? Latin American per capita GDP in colonial times By Leticia Arroyo Abad; Jan Luiten van Zanden
  19. Knowledge Spillovers, ICT and Productivity Growth By Corrado, Carol; Haskel, Jonathan; Jona-Lasinio, Cecilia
  20. The Piketty Transition By Carroll, Daniel R.; Young, Eric R.
  21. The Biocultural Origins of Human Capital Formation By Galor, Oded; Klemp, Marc P B

  1. By: Lars Boerner; Battista Severgnini
    Abstract: This paper uses the spread of disease as a proxy to measure economic interactions. Based on a case study of the Black Death (1346-51) in the Mediterranean region and Europe, we find geographic, institutional, and cultural determinants of trade. To achieve this we create and empirically test a trade model between cities. Our findings allow us to create a new methodology to measure economic interaction and shed light on open questions in economics, especially pertaining to trade, economic history, and growth
    Keywords: trade; Black Death; gravity model; Poisson pseudo maximum likelihood; spatial regression discontinuity
    JEL: N0
    Date: 2014
  2. By: Philipp Ager (University of Southern Denmark); Casper Worm Hansen (Aarhus University); Peter Sandholt Jensen (University of Southern Denmark)
    Abstract: We examine how the introduction of smallpox vaccination affected early-life mortality and fertility in Sweden during the first half of the 19th century. We demonstrate that parishes in counties with higher levels of smallpox mortality prior to the introduction of vaccination experienced a greater decline in infant mortality afterwards. Exploiting this finding in an instrumental-variable approach reveals that this decline had a negative effect on the birth rate, while the number of surviving children and population growth remained unaffected. These results suggest that the decline in early-life mortality cannot account for the onset of the fertility decline in Sweden.
    Keywords: Fertility transition, infant mortality, smallpox vaccine
    JEL: J10 J13 I15
    Date: 2014–07
  3. By: Piketty, Thomas; Zucman, Gabriel
    Abstract: This article offers an overview of the empirical and theoretical research on the long run evolution of wealth and inheritance. Wealth-income ratios, inherited wealth, and wealth inequalities were high in the 18th-19th centuries up untilWorldWar 1, then sharply dropped during the 20th century following World War shocks, and have been rising again in the late 20th and early 21st centuries. We discuss the models that can account for these facts. We show that over a wide range of models, the long run magnitude and concentration of wealth and inheritance are an increasing function of r — g, where r is the net-of-tax rate of return on wealth and g is the economy's growth rate. This suggests that current trends toward rising wealth-income ratios and wealth inequality might continue during the 21st century, both because of the slowdown of population and productivity growth, and because of rising international competition to attract capital.
    Keywords: distribution; income; wealth
    JEL: H00
    Date: 2014–07
  4. By: Čizmović, Mirjana; Popović, Milenko
    Abstract: This paper provides comparative analysis of the proximate causes of growth of South East European, Central European and Former Soviet Union countries. The first section covers comparative sources of growth analysis for GDP. Apart from this conventional sources-of-growth analysis, both the demand and the industry side decomposition of the GDP growth rate, is given in second section of the paper. In the demand side of the sources-of-growth analysis, special attention is devoted to the issue of the level of capital account liberalisation and its influence on the growth anatomy. Connected with this is the issue of industry / sectors side sources-of-growth analysis. The third section covers comparative source-of-growth analysis for GDP per capita as an approximation of growth of standard of living. The results of the above mentioned different sources-of-growth approaches present a good basis for further research of fundamental causes of growth of these countries.
    Keywords: Causes of Growth,Proximate causes,Fundamental causes,Convergence
    JEL: O47 O52
    Date: 2014–09
  5. By: Kazuo MIno (Kyoto University)
    Abstract: This paper constructs a simple model of endogenous growth with ?financial frictions and ?firm heterogeneity. In the presence of fi?nancial constraints and heterogeneity in pro- duction efficiency of fi?rms, the fi?rms whose efficiency exceeds the cutoff level produce and the entrepreneurs who own those fi?rms become borrowers. We show that even if production technology of each fi?rm has an Ak property, the aggregate economy has transition dynamics and that the balanced growth rate depends on the aggregate distribution of wealth between rentiers and entrepreneurs.
    Keywords: financial frictions, firm heterogeneity, endogenous growth, wealth distribution
    JEL: E01 O40
    Date: 2014–12
  6. By: Furuoka, Fumitaka
    Abstract: This paper chooses a Malaysian state in Borneo Island, Sarawak, as the case study to examine the relationship between population growth and economic development. The findings imply that there is no statistically significant long-run relationship, but a causal relationship between population growth and economic development in Sarawak. In other words, the empirical findings indicate that population can have neither positive nor negative impact on economic development. The findings also indicated that income expansion did cause the population expansion in Sarawak, Malaysia.
    Keywords: Population growth, Economic development, Sarawak, Malaysia
    JEL: J1 O53
    Date: 2014
  7. By: Çürük, M. (Tilburg University, School of Economics and Management)
    Abstract: This thesis deals with a range of topics in economic growth and international trade. The first part investigates the role of geographic and occupational immobility in determining the spatial variation in the degree of labor specificity in the short-run. The second part takes a longer time-perspective and provides a theory to rationalize the observed changes in the rate and direction of technological progress and labor allocation across broad sectors over the course of development. The third part focuses on the interaction between the institutional setting and pre-modern economic forces to understand the diffusion of German Reformation in the 16th century. Finally, the last part documents a positive relationship between trade with technology leaders and inter-sectoral markup variation for developing countries and provides a model which underscores the importance of technology diffusion to understand the observed patterns.
    Date: 2014
  8. By: Amit Batabyal; Peter Nijkamp
    Abstract: We study innovation and the resulting Schumpeterian economic growth that this innovation gives rise to in a model with N heterogeneous regions. For each region i where i=1,...,N, our analysis leads to five findings. First, we define the balanced growth path (BGP) allocations and the equilibrium of interest. Second, we stipulate the form of the innovation possibilities frontier that is consistent with balanced economic growth. Third, we derive the growth rate of the ith region in the decentralized equilibrium and show that there are no transitional dynamics. Fourth, we solve the social planner's problem and derive the Pareto optimal growth rate for the ith region. Fifth, we compare the two preceding growth rates and then discuss the circumstances in which there is either too much or too little innovation in (i) the ith region, (ii) the aggregate economy of N>2 regions and (iii) the specific case of an aggregate economy of N=2 regions. Finally, we conclude and then offer suggestions for extending the research described here.
    Keywords: Human Capital; Innovation; Multi-Region Economy; Schumpeterian Economic Growth
    JEL: R11 J24 O31
    Date: 2014–11
  9. By: Simplice Asongu (Yaoundé/Cameroun); Voxi Amavilah (Phoenix AZ, USA); Antonio Andrés (Madrid, Spain)
    Abstract: This paper develops an empirically-relevant framework (a) to examine whether or not the African business environment hinders or promotes the knowledge economy (KE), (b) to determine how the KE which emerges from such an environment affects economic growth, and (c) how growth in turn relates to the ‘inclusive development’ of 53 African countries during the 1996-2010 time period. The framework provides a modest guide to policymaking about, and further research into, such relationships. We implement the framework by building a three-stage model and rationalizing it as five interrelated hypotheses. To allow greater concentration on the issues that are themselves already complex, our model is very simple, but clear. For example, we make neither an attempt to evaluate causality nor to test for it, even though we suspect the links to be multi-directional – opportunity costs are everywhere. Instead we focus on fundamental relationships between the dynamics of starting business and doing business as expressed in the state of KE, and through it to the inclusive development via the economic growth of those countries. Estimation results indicate that the dynamics of starting and doing business explain strongly a large part of variations in KE. The link between KE and economic growth exists, but it is weak, and we provide plausible reasons for such a result. Despite the weak association between KE and economic growth, KE-influenced growth plays a very important role in inclusive development. In fact, growth of this kind has stronger effects on inclusive development and by implication on poverty reduction, than some of conventional controls in this study such as FDI, foreign aid, and even private investment. There is clearly room for further research to improve the results, but just as clearly practical policy is best served by not neglecting the relationships examined in this paper.
    Keywords: Business Dynamics; Knowledge Economy; Development; Africa
    JEL: L59 O10 O30 O20 O55
    Date: 2014–12
  10. By: Namasaka, Martin
    Abstract: By focusing solely on the institutional reforms and changes in the political leadership that precede political liberalisation, studies on the determinants of democracy have often overlooked the influence of demographic factors such as population age structure as a catalyst for and reflection of a host of changes in societies that can affect governance and stability of liberal democracy. It is not surprising, noting the recent revolutions such as the Arab spring and the Egyptian Uprising , that numerous research now tends to spotlight the so called youth bulge and how they tend to either support authoritarian regimes or sustain liberal democracies as a result of youth-led democracy movements as witnessed in Costa Rica, India, Jamaica and South Africa (Cincotta, R. (2008/09).
    Keywords: Demographic Transition, Democracy, Population Growth in Sub-Saharan Africa, Perspectives on the Demographic Transition, Youth Bulge, Second and Third Demographic Transition, China and India, Demographic Transition and Economic Growth and Demographic Responses, Fertility Decline and the Demographic Transition, Population and Development, Population and National Security, Demographic Transition and Changing Sex Roles
    JEL: J1 J11 J13 O1 O40 O47
    Date: 2014–11–22
  11. By: Elise S. Brezis (Bar-Ilan University)
    Abstract: The purpose of this paper is to examine the effects of paid basic income on fertility rates in a model in which fertility rates are endogenous. I show that when child labor is not a crucial part of the income of the family, then paid basic income will lead to higher fertility rates. However, when child labor is a necessity, then in fact an increase in paid basic income will lead to a reduction in fertility rates.
    Keywords: basic income, fertility rates; economic growth; child labor; Sibship size effect
    JEL: B10 D10 J13
    Date: 2014–11
  12. By: Kunal Sen; Sabyasachi Kar; Jagadish Prasad Sahu
    Abstract: We examine the political economy causes of India's growth acceleration in the early 1990s, the periods of high growth in the 1990s and early 2000s, and the subsequent slowdown since 2011, drawing from the ESID conceptual framework (Pritchett and Werker 2013) and periodisation of growth episodes (Kar et al. 2013a). We argue that India's post-reform growth experience can be separated into three distinct growth episodes. The first growth episode, from 1993 to 2002, was characterised by a set of predictable informal (and relatively open) relationships (which we call 'ordered deals') between political and economic elites. The second episode was from 2002 to 2010; deals in this period became increasingly closed, leading to negative feedback effects from accountability institutions, the middle class and non-elites, along with structural retrogression of the economy. The third episode, beginning in 2011, was one of an incipient growth deceleration, and was characterised by increasingly disordered deals. Our analysis of the Indian growth experience provides support for the conceptual framework we have used here and our other ESID growth studies. The wider implication of our analysis is that economic growth in most developing country contexts remains episodic and prone to collapse, as institutions do not evolve over the growth process, and in many instances, deteriorate.
    Date: 2014
  13. By: Prados de la Escosura, Leandro
    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; historical national accounts; Spain; splicing GDP
    JEL: C82 E01 N13 O47
    Date: 2014–09
  14. By: Grossman, Gene; Helpman, Elhanan
    Abstract: We introduce firm and worker heterogeneity into a model of innovation-driven endogenous growth. Individuals who differ in ability sort into either a research sector or a manufacturing sector that produces differentiated goods. Each research project generates a new variety of the differentiated product and a random technology for producing it. Technologies differ in complexity and productivity, and technological sophistication is complementary to worker ability. We study the co-determination of growth and income inequality in both the closed and open economy, as well as the spillover effects of policy and conditions in one country to outcomes in others.
    Keywords: endogenous growth; income distribution; income inequality; innovation; trade and growth
    JEL: D33 F12 F16 O41
    Date: 2014–11
  15. By: Antolin-Diaz, Juan; Drechsel, Thomas; Petrella, Ivan
    Abstract: Using a Bayesian dynamic factor model that allows for changes in both the long-run growth rate of output and the volatility of business cycles, we document a significant decline in long-run growth in the United States and in other advanced economies. Our evidence supports the view that this slowdown started prior to the Great Recession. When applied to real-time data, the proposed model is capable of detecting shifts in long-run growth in a timely and reliable manner. Furthermore, taking into account the variation in long-run growth improves the short-run forecasts and "nowcasts" of US GDP typically produced using this class of models.
    Keywords: Bayesian methods; dynamic factor models; long-run growth; mixed frequencies; real-time forecasting
    JEL: C11 C38 C53 E37
    Date: 2014–11
  16. By: Andreas Irmen (CREA, Université du Luxembourg); Alfred Maußner (University of Augsburg)
    Abstract: The Inada (1963) conditions constitute a defining property of the neoclassical production function with capital and labor as arguments. Are these conditions justifiable on economic grounds? Yes, they are: we show that a production function with positive, yet diminishing marginal products and constant returns to scale satisfies the Inada conditions if i) both inputs are essential and ii) an unbounded quantity of either input leads to unbounded output. This allows for an alternative characterization of the neoclassical production function that altogether dispenses with the Inada conditions. Moreover, we establish that the marginal product of capital vanishes as capital goes to infinity if labor is an essential input. Given the intuitive appeal of the latter feature, we conclude that the neoclassical growth model is a theory of eventual stagnation.
    Keywords: Neoclassical Growth Model, Capital Accumulation, Stagnation, Inada Conditions
    JEL: E10 O10 O40
    Date: 2014
  17. By: Alfonso Díez-Minguela (Dpto. Análisis Económico); Julio Martínez-Galarraga (Dpto. Análisis Económico); Daniel A. Tirado Fabregat (Dpto. Análisis Económico)
    Abstract: In this paper we explore the relationship between the spatial agglomeration of economic activity and regional economic growth in Spain during the period 1870-1930. The study allows us to revisit the existence of a trade-off between economic growth and territorial cohesion and also to examine whether the agglomeration of production was a key element to explain the upswing in regional income inequality in Spain during the country’s early stages of development. In doing this, we present alternative indicators for agglomeration and estimate conditional growth regressions at province (NUTS3) level. The results show the existence of a positive, robust relationship between the initial levels of regional agglomeration (mainly in the industrial sector) and subsequent growth trajectories. In line with new economic geography (NEG) models, we suggest that the presence of agglomeration economies in a context of market integration favoured the emergence of a cumulative causation process that widened regional inequality in the second half of the 19th century and hindered its reduction during the early decades of the 20th. En este artículo se analiza la existencia de una relación entre la aglomeración espacial de la actividad y el crecimiento económico regional en España durante el periodo 1870-1930. El estudio permite revisitar la existencia de un trade-off entre crecimiento económico y cohesión territorial y, además, examinar si la aglomeración productiva fue un elemento clave a la hora de explicar el incremento de la desigualdad económica regional en España a lo largo de las primeras fases del desarrollo. Para ello, se presentan diferentes indicadores de aglomeración a nivel provincial (NUTS3) que posteriormente se incluyen en la estimación de regresiones de crecimiento condicionadas. Los resultados muestran la existencia de una relación positiva y robusta entre el nivel inicial de aglomeración (principalmente en el sector industrial) y la posterior trayectoria de crecimiento regional. En la línea de los modelos de Nueva Geografía Económica (NEG), sugerimos que la presencia de economías de aglomeración en un contexto de integración de mercado favoreció la aparición de una causación acumulativa que amplió la desigualdad regional en la segunda mitad del siglo XIX y dificultó su reducción durante las primeras décadas del siglo XX.
    Keywords: aglomeración, crecimiento económico, historia económica, España. agglomeration, economic growth, economic history, Spain.
    JEL: N13 N93 O10 O40 R10
    Date: 2013–11
  18. By: Leticia Arroyo Abad; Jan Luiten van Zanden
    Abstract: This paper presents new estimations of per capita GDP in colonial times for the two pillars of the Spanish empire: Mexico and Peru. We find dynamic economies as evidenced by increasing real wages, urbanization, and silver mining. Their growth trajectory is such that both regions reduced the gap with respect to Spain and even achieved parity. While experiencing swings in growth, the notable turning point is in 1780 as bottlenecks in production and later the independence wars reduced economic activity. To explain the long periods of growth between 1550 and 1780 we argue that these countries witnessed endogenous adaptations in institutions resulting in increased market orientation towards and a more balanced distribution of power between Spain and local elites. Our results question the notion that colonial institutions impoverished Latin America.
    Keywords: GDP per capita, growth, Latin America
    Date: 2014–11
  19. By: Corrado, Carol; Haskel, Jonathan; Jona-Lasinio, Cecilia
    Abstract: This paper looks at the channels through which intangible assets affect productivity. The econometric analysis exploits a new dataset on intangible investment (INTAN-Invest) in conjunction with EUKLEMS productivity estimates for 10 EU member states from 1998 to 2007. We find that (a) the marginal impact of ICT capital is higher when it is complemented with intangible capital, and (b) non-R&D intangible capital has a higher estimated output elasticity than its conventionally-calculated factor share. These findings suggest investments in knowledge-based capital, i.e., intangible capital, produce productivity growth spillovers via mechanisms beyond those previously established for R&D.
    Keywords: economic growth; ICT; intangible assets; intangible capital; productivity growth; spillovers
    JEL: E01 E22 O47
    Date: 2014–07
  20. By: Carroll, Daniel R. (Federal Reserve Bank of Cleveland); Young, Eric R. (University of Virginia)
    Abstract: We study the effects on inequality of a "Piketty transition" to zero growth. In a model with a worker-capitalist dichotomy, we show first that the relationship between inequality (measured as a ratio of incomes for the two types) and growth is complicated; zero growth can raise or lower inequality, depending on parameters. Extending our model to include idiosyncratic wage risk we show that growth has quantitatively negligible effects on inequality, and the effect is negative. Finally, following Piketty’s thought experiment, we study how the transition might occur without declining returns; here, we find inequality decreases substantially if financial innovation acts to reduce idiosyncratic return risk, and does not change much at all if it acts to increase capital’s share of income.
    Keywords: inequality; heterogeneity; zero-growth
    JEL: D31 D33 D52 E21
    Date: 2014–12–03
  21. By: Galor, Oded; Klemp, Marc P B
    Abstract: This research explores the biocultural origins of human capital formation. It presents the first evidence that moderate fecundity and thus predisposition towards investment in child quality was conducive for long-run reproductive success within the human species. Using an extensive genealogical record for nearly half a million individuals in Quebec from the sixteenth to the eighteenth centuries, the study explores the effect of fecundity on the number of descendants of early inhabitants in the subsequent four generations. The research exploits variation in the random component of the time interval between the date of first marriage and the first birth to establish that while higher fecundity is associated with a larger number of children, an intermediate level maximizes long-run reproductive success. Moreover, the observed hump-shaped effect of fecundity on long-run reproductive success reflects the negative effect of higher fecundity on the quality of each child. The finding further indicates that the optimal level of fecundity was below the population median, lending credence to the hypothesis that during the Malthusian epoch, the forces of natural selection favored individuals with lower fecundity and thus larger predisposition towards child quality, contributing to human capital formation, the onset of the demographic transition and the evolution of societies from an epoch of stagnation to sustained economic growth.
    Keywords: demography; economic growth; evolution; fecundity; human capital formation; long-run reproductive success; natural selection; quantity-quality trade-off
    JEL: J10 N30 O10
    Date: 2014–09

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