nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒01‒26
fifteen papers chosen by
Marc Klemp
Brown University

  1. The identification of directed technical change revisited By Saam, Marianne
  2. Baby-Boom, Baby-Bust and the Great Depression By Andriana BELLOU; Emanuela CARDIA
  3. Income Inequality, Capitalism and Ethno-linguistic Fractionalization By Jan-Egbert Sturm; Jakob de Haan
  4. Endogenous growth with a limited fossil fuel extraction capacity By Gilbert Kollenbach
  6. The endogeneity of the natural rate of growth: An alternative approach By Senay, Acikgöz; Mert, Merter
  7. “Malthus living in a slum: urban concentration, infrastructures and economic growth” By David Castells
  8. Pensions, Education, and Growth: A Positive Analysis By Tetsuo Ono; Yuki Uchida
  9. Productivity and the Welfare of Nations By Susanto Basu
  10. 'Public Spending and Transitional Dynamics of an Innovation-Based Growth Model' By Baris Alpaslan
  11. Population Aging and Growth: the Effect of PAYG Pension Reform By Ken Tabata
  12. Skill-Structure Shocks, the Share of the High-Tech Sector and Economic Growth Dynamics By Pedro Mazeda Gil; Oscar Afonso; Paulo B. Vasconcelos
  13. ICT and economic growth: Comparing developing, emerging and developed countries By Niebel, Thomas
  14. Public debt, economic growth and public sector management in developing countries: is there a link? By Megersa, Kelbesa; Cassimon, Danny
  15. Green Agrowth as a Third Option: Removing the GDP-Growth Constraint on Human Progress By Jeroen van den Bergh

  1. By: Saam, Marianne
    Abstract: Technical change that augments capital and labor input in a non-neutral way plays an important role in explaining the relation between growth and other macroeconomic outcomes. Previous research has shown that restricting technical change to be neutral leads to overestimating the elasticity of substitution between capital and labor. I extend this line of analysis to misspecification of the functional form. Evidence from Monte Carlo simulations shows that the problem of biased estimates of the direction of technical change is relevant in the estimation of aggregate CES and translog production functions. In particular, I find examples where true technical change is neutral and estimated technical change is strongly directed towards one factor.
    Keywords: directed technical change,estimation of production functions,CES functions,translog functions
    JEL: C15 O30 O47
    Date: 2014
  2. By: Andriana BELLOU; Emanuela CARDIA
    Abstract: The baby-boom and subsequent baby-bust have shaped much of the history of the second half of the 20th century; yet it is still largely unclear what caused them. This paper presents a new unified explanation of the fertility Boom-Bust that links the latter to the Great Depression and the subsequent economic recovery. We show that the 1929 Crash attracted young married women 20 to 34 years old in 1930 (whom we name D-cohort) in the labor market possibly via an added worker effect. Using several years of Census micro data, we further document that the same cohort kept entering into the market in the 1940s and 1950s as economic conditions improved, decreasing wages and reducing work incentives for younger women. Its retirement in the late 1950s and in the 1960s instead freed positions and created employment opportunities. Finally, we show that the entry of the D-cohort is associated with increased births in the 1950s, while its retirement turned the fertility Boom into a Bust in the 1960s. The work behavior of this cohort explains a large share of the changes in both yearly births and completed fertility of all cohorts involved.
    Keywords: baby boom, baby bust, great depression, added worker effect, retirement, fertility
    Date: 2015
  3. By: Jan-Egbert Sturm (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Jakob de Haan (University of Groningen, NL)
    Abstract: We examine the relationship between capitalism and income inequality for a large sample of countries using an adjusted economic freedom index as proxy for capitalism and Gini coefficients based on gross-income as proxy for income inequality. Our results suggest that there is no robust relationship between economic freedom and income inequality. In addition, we analyze the relationship between income redistribution (measured by the ratio of the income distribution resulting from market processes and the income distribution after redistribution) and ethno-linguistic fractionalization. We find that the impact of ethno-linguistic fractionalization on income redistribution is conditional on the level of economic freedom: countries that have a high degree of fractionalization have less income redistribution, while capitalist countries that have a low degree of fractionalization have more income distribution.
    Keywords: economic freedom, ethno-linguistic fractionalization, income inequality, Economic Freedom, redistribution
    JEL: D31 D63 F02 O11 O15
    Date: 2014–12
  4. By: Gilbert Kollenbach
    Keywords: exhaustible resources, limited extraction capacity, endogenous growth
    JEL: Q32 Q42 O41
    Date: 2014
  5. By: Ewa Lechman (Gdansk University of Technology, Gdansk, Poland)
    Abstract: Similar to economic growth, the process of technology diffusion may well be approximated by easily distinguishable phases (stages). During the initial phase, the process of diffusion slows, whereas subsequently, under favourable circumstances, it accelerates and proceeds at an exponential growth rate, ultimately approaching relative stabilisation (maturity) when the growth rates gradually diminish. Following the proposed by Rostow (1956) conceptualization of the ‘take-off’, this work is a trial conceptualization of the concepts related to the technology diffusion process, namely – ‘technological take-off’ and the ‘critical mass’. It demonstrates the ‘step-by-step’ procedure of the identification of the ‘critical mass’, and the interval when the ‘technological take-off’ emerges. We propose the term ‘technological take-off’ and define it the time interval when the nature of the diffusion process is radically transformed due to shifting the rate of diffusion and forcing the transition from condition of stagnation into dynamic and self-sustaining growth (diffusion) of new technology; while the ‘critical penetration rate’ we define as the threshold that, once passed, provokes the diffusion to become self-perpetuating.
    Keywords: technology, technology diffusion, critical mass, take-off
    JEL: O3
    Date: 2015–01
  6. By: Senay, Acikgöz; Mert, Merter
    Abstract: This study estimates and tests the endogeneity of the natural rate of growth using the balance-of-payments consistent rate of growth (BPCRG) instead of the actual rate of growth. Our approach is also theoretically compatible with the one proposed by Thirlwall (2001). Following this idea, we first calculated the BPCRG and then tested the Thirlwall's Law for the U.S. economy. We then proceeded to test the endogeneity using the BPCRG. Empirical results we obtained support Thirlwall's Law and endogeneity.
    Keywords: economic growth,Thirlwall's Law,the endogeneity of the natural rate of growth,the bounds testing approach,ARDL,FM-OLS
    JEL: O40 E10 E23 C22
    Date: 2015
  7. By: David Castells (Department of Econometrics. University of Barcelona)
    Abstract: The link between urban concentration and economic growth at country level is not straightforward, as there are benefits as well as costs associated with urban concentration. Indeed, recent empirical evidence suggests different effects of urban concentration on growth depending on the level of development and the world region under analysis. This paper revisits the literature on urban concentration and economic growth to shed some light on these previous results. In particular, differences in the process of urbanisation, and in the quality of the urban environment itself, have been suggested as most likely defining the balance between benefits and costs from urban concentration, and are probably behind differences in the relationship between concentration and growth. However, empirical evidence in this regard remains very limited. The aim of the paper is to fill this gap by paying special and explicit attention to differences between world regions in terms of urban infrastructure, essentially access to basic urban services. The main contribution of the paper is to therefore provide empirical evidence on the role that the urban environment plays in the relationship between urban concentration and economic growth.
    Keywords: Agglomeration, urbanisation, urban concentration, infrastructure, congestion diseconomies, growth, Sub-Sahara Africa JEL classification: O1, O4, R1
    Date: 2015–01
  8. By: Tetsuo Ono (Graduate School of Economics, Osaka University); Yuki Uchida (Graduate School of Economics, Osaka University)
    Abstract: This study presents an overlapping generations model to capture the nature of the competition between generations regarding two redistribution policies, public education and public pensions. In addition, we investigate the effects of population aging on these policies and economic growth from a political economy viewpoint. We show that two aging factors, longevity and the political power of the old, have op- posite effects on redistribution policies and economic growth. The relative strength between the two factors is negative for pensions, but hump-shaped patterns appear for public education and economic growth.
    Keywords: economic growth; population aging; public education; public pen-sions
    JEL: D78 E24 H55
    Date: 2014–12
  9. By: Susanto Basu (Boston College)
    Abstract: We show that the welfare of a countrys infinitely-lived representative consumer is summarized, to a first order, by total factor productivity (TFP) and by the capital stock per capita. These variables suffice to calculate welfare changes within a country, as well as welfare differences across countries. The result holds regardless of the type of production technology and the degree of product market competition. It applies to open economies as well, if TFP is constructed using domestic absorption, instead of gross domestic product, as the measure of output. Welfare relevant TFP needs to be constructed with prices and quantities as perceived by consumers, not firms. Thus, factor shares need to be calculated using after-tax wages and rental rates, and will typically sum to less than one. These results are used to calculate welfare gaps and growth rates in a sample of advanced countries with high-quality data on output, hours worked, and capital. We also present evidence for a broader sample that includes both advanced and developing countries.
    Date: 2014
  10. By: Baris Alpaslan
    Abstract: This paper extends a three-period Overlapping Generations (OLG) model of endogenous growth where the interactions between public infrastructure, human capital with R&D activities, and growth are studied. The model accounts for the externality of technical knowledge associated with human capital which promotes the innovation capacity in adopting imported technologies and developing new technologies. In order to study the transitional dynamics of the model and to illustrate the impact of public policy, the model is calibrated using average data for low-income countries and sensitivity analysis is reported under different parameter configurations. Based on the numerical analysis for a low-income country, we show that trade-offs in the allocation of public spending may inevitably emerge. However, investment in infrastructure at the expense of spending on R&D is less likely to succeed in promoting growth, whereas it may be more effective to foster economic growth through an offsetting cut in education.
    Date: 2015
  11. By: Ken Tabata (School of Economics, Kwansei Gakuin University)
    Abstract: This paper examines how pay-as-you-go (PAYG) pension reform from a defined-benefit scheme to a defined-contribution scheme affects economic growth in an overlapping generations model with endogenous growth. We show that in economies in which the old-age dependency ratio is relatively high and the size of pension benefits under a defined-benefit scheme is relatively large, PAYG pension reform from a defined-benefit scheme to a defined-contribution scheme mitigates the negative growth effect of population aging caused by a decline in the population growth rate or an increase in life expectancy.
    Keywords: Population aging, PAYG pensions, Defined-benefit schemes, Definedcontribution schemes
    JEL: D91 H55 O41
    Date: 2015–01
  12. By: Pedro Mazeda Gil (Faculdade de Economia, Universidade do Porto); Oscar Afonso (Faculdade de Economia, Universidade do Porto); Paulo B. Vasconcelos (Faculdade de Economia, Universidade do Porto)
    Abstract: By means of an endogenous growth model of directed technical change with vertical and horizontal R&D, we study a transitional-dynamics mechanism that is consistent with the changes in the share of the high- versus the low-tech sectors found in recent European data. Under the hypothesis of a positive shock in the proportion of high-skilled labour, the technological-knowledge bias channel leads to nonbalanced sectoral growth with a noticeable shift of resources across sectors. A simple calibration exercise suggests that, under prevailing market-scale effects, the model is able to account for up to 50 to 100 percent of the increase in the share of the high-tech sector observed in the data from 1995 to 2007. However, the model predicts that the dynamics of the share of the high-tech sector has no significant impact on the economic growth rate.
    Keywords: industry dynamics, high tech, low tech, directed technical change, economic growth
    JEL: O41 O31
    Date: 2015–01
  13. By: Niebel, Thomas
    Abstract: This paper analyzes the impact of information and communication technologies (ICT) on economic growth in developing, emerging and developed countries. It is based on a sample of 59 countries for the period 1995 to 2010. Various panel data regressions confirm the positive relationship between ICT capital and GDP growth. The regressions for the subsamples of developing, emerging and developed countries do not reveal statistically significant differences of the output elasticity of ICT between these three country groups.
    Keywords: ICT,Economic Growth
    JEL: E22 J24 O47
    Date: 2014
  14. By: Megersa, Kelbesa; Cassimon, Danny
    Abstract: The paper investigates whether differences in public sector management quality affect the link between public debt and economic growth in developing countries. For this purpose, we primarily use World Bank’s institutional indices of public sector management (PSM). Using PSM thresholds, we split our panel into country clusters and make comparisons. Our linear baseline regressions reveal a significant negative relationship between public debt and growth. The various robustness exercises that we perform also confirm these results. When we dissect our dataset into ‘weak’ and ‘strong’ county clusters using public sector management scores, however, we find different results. While public debt still displayed a negative relationship with growth in countries with ‘weak’ public sector management quality, it generally displayed a positive relationship in the latter group. The tests for non-linearity shows evidence of an ‘inverse-U’ shape relationship between public debt and economic growth. However, we fail to see a similar significant relationship on country clusters that account for PSM quality. Yet, countries with well managed public sectors demonstrate a higher public debt sustainability threshold.
    Keywords: public debt, economic growth, public sector management, developing countries
    JEL: E62 F34 H63 H83 O11
    Date: 2014–12
  15. By: Jeroen van den Bergh
    Abstract: The debate on growth versus the environment is usually summarized as optimists believing in limitless growth versus pessimists seeing environmental and resource limits to growth. This opposition defines the main strategies: namely, striving for green growth versus some anti-growth approach. In this paper I argue that we should not feel obliged to choose between these polarized opinions, as there is in fact a third option. I call this the “agrowth” strategy, and it offers a way out of the impasse that characterizes the growth-versus-environment debate. I will define this agrowth strategy, motivate its rationality, and examine its premises, implications, advantages, political feasibility and practical steps. I suggest that an agrowth strategy follows logically from accepting the shortcomings of GDP (per capita) as an indicator of social welfare. It will be graphically shown that both anti-growth and pro-growth goals represent avoidable, unnecessary constraints on our search for human betterment, which lead to lower realizations of social welfare than are in fact feasible. I will further discuss the idea of green agrowth, notably in the context of avoiding dangerous climate change. Finally, a pragmatic approach to selecting alternative macro indicators is proposed.
    Keywords: climate change, degrowth, GDP paradox, green growth, growth debate, macro indicators
    JEL: E6 I13 O4 Q54
    Date: 2015–01

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