nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒02‒22
thirteen papers chosen by
Marc Klemp
Brown University

  1. Agricultural Technology and Structural Change By Markus Eberhardt; Dietrich Vollrath
  2. Railroads and Growth in Prussia By Hornung, Erik
  3. Transportation Technology and Economic Change: The Impact of Colonial Railroads on City Growth in Africa By Remi Jedwab; Alexander Moradi
  4. Human capital, basic research, and applied research: three dimensions of human knowledge and their differential growth effects By Werner, Katharina; Prettner, Klaus
  5. Public policies, growth, and agglomeration By Ott, Ingrid; Soretz, Susanne
  6. The Elasticity of Poverty with respect to Sectoral Growth in Africa By N. Berardi; F. Marzo
  7. Risk-Taking, Global Diversification and Growth: Comment By Patrick Pintus
  8. Can measures of broadband infrastructure improve predictions of economic growth? By Mayer, Walter J.; Madden, Gary; Dang, Xin
  9. The Ejido System and Economic Growth of the Mexican States By Wallace, Frederick; Chapa Cantú, Joana
  10. The Economic Effect of Corruption in Italy: A Regional Panel Analysis By Lisciandra, Maurizio; Millemaci, Emanuele
  11. Spatial aspects of economic growth. Review of theoretical literature By Tomasz Brodzicki
  12. Government spending in education and economic growth in Cameroon:a Vector error Correction Model approach By Douanla Tayo, Lionel; Abomo Fouda, Marcel Olivier
  13. Post-Malthusian Dynamics in Pre-Industrial Scandinavia By Marc Klemp; Niels Framroze Møller

  1. By: Markus Eberhardt; Dietrich Vollrath
    Abstract: Using data for 128 countries we document low (high) elasticities of agricultural output with respect to labor in economies within temperate (tropical/highland) climate zones.  Adopting a standard model of structural change we show that this technology heterogeneity determines the speed of structural transformation following changes in agricultural productivity and population size.  Calibration exercises document shifts in sectoral labor allocation and living standards 2-3 times larger in temperate than in otherwise identical equatorial/highland regions for a given productivity shock.  Eliminating technology heterogeneity can account for up to one-fifth of the observed differences in aggregate income per capita across countries.
    Keywords: agricultural development, technology heterogeneity, agro-climatic environment, structural change
    JEL: O47 O11 C23
    Date: 2014–06–03
  2. By: Hornung, Erik
    Abstract: We study the effect of railroad access on urban population growth. Using GIS techniques, we match triennial population data for roughly 1,000 cities in nineteenth-century Prussia to georeferenced maps of the German railroad network. We find positive short- and long-term effects of having a station on urban growth for different periods during 1840--1871. Causal effects of (potentially endogenous) railroad access on city growth are identified using propensity score matching, instrumental variables, and fixed-effects estimation techniques. Our instrument identifies exogenous variation in railroad access by constructing straight-line corridors between nodes. Counterfactual models using pre-railroad growth yield no evidence to support the hypothesis that railroads appeared as a consequence of a previous growth spurt.
    JEL: O18 O33 N73
    Date: 2014
  3. By: Remi Jedwab; Alexander Moradi
    Abstract: What is the impact of modern transportation technology on long-run economic change in poor countries with high trade costs?  Rail construction in colonial Sub-Saharan Africa provides a natural experiment: 90% of African rail-road lines were built before independence, in a context where headloading was the dominant transportation technology.  Using new data on railroads and cities over one century within one country, Ghana, and Africa as a whole, we find large permanent effects of transportation technology on economic development.  First, colonial railroads had strong effects on commercial agriculture and urban growth before independence. We exploit various identification strategies to ensure these effects are causal.  Second, using the fact that African railroads fell largely out of use post-independence, due to mismanagement and lack of maintenance, we show that colonial railroads had a persistent impact on cities.  While colonial sunk investments (e.g. schools, hospitals and roads) partly contributed to urban path dependence, evidence suggests that railroad cities persisted because their early emergence served as a mechanism to coordinate contemporary investments for each subsequent period.  Railroad cities are also wealthier than non-railroad cities of similar sizes today.  This suggests a world where shocks to economic geography can trigger an equilibrium in which cities will emerge to facilitate the accumulation of factors, and thus have long-term effects on economic growth.
    Keywords: Transportation Technology, Development, Path Dependence, growth
    JEL: R4 R1 O1 O3 N97
    Date: 2013–11–18
  4. By: Werner, Katharina; Prettner, Klaus
    Abstract: We analyze the di fferential growth e ffects of basic research, applied research, and embodied human capital accumulation in an R&D-based growth model with endogenous fertility and endogenous education. In line with the empirical evidence, our model allows for i) a negative association between long-run economic growth and population growth, ii) a positive association between long-run economic growth and education, and iii) a positive association between the level of per capita GDP and expenditures for basic research. Our results also indicate that raising public investments in basic research reduces the growth rate of GDP in the short run because resources have to be drawn away from other productive sectors of the economy. These short-run costs of basic research might be an explanation for the reluctance of governments to increase public R&D expenditures notwithstanding the long-run benefi ts of such a policy.
    JEL: O41 H41 J11
    Date: 2014
  5. By: Ott, Ingrid; Soretz, Susanne
    Abstract: This paper analyzes within a two-region endogenous growth model how different types of public policies affect the equilibrium spatial distribution of economic activity. Integration is modeled as a continuum and enables firms to access the public input of the respective other region. Given a dominance of agglomeration forces, multiple equilibria arise at which spreading becomes unstable and the stable equilibrium is characterized by a core-periphery structure. If only partial coordination of the two goverments decisions is realized, the positive productivity impact of one region s public input on the other region s marginal capital return becomes a positive externality. Then, the concentration of public inputs may end up to be suboptimally high or low, depending on the degree of scale effects. We perform numerical simulations to derive the equilibrium capital distribution and to disentangle the impact of the various determinants on equilibrium agglomeration.
    JEL: O40 R50 D50
    Date: 2014
  6. By: N. Berardi; F. Marzo
    Abstract: The African continent has grown by more than 4 per cent yearly on average during the past decade. However, the link between this remarkable growth rate and poverty reduction is neither obvious nor simple. This paper focuses on the elasticity of poverty with respect to GDP growth at the sectoral level and takes into account the fact that economic growth may affect poverty directly as well as indirectly through sectoral labor share intensity. It develops a methodology that sheds light on the contribution of sectoral growth to poverty reduction country-by-country in Africa, guiding policy recommendations. As the composition of growth matters at least as much as its overall intensity, it is key to identify the sectors that have the strongest impact on poverty reduction and unleash their potential; if growth happens to concentrate in sectors with scarce pro-poor potential, like commodity-driven growth, redistributive strategies are necessary to compensate the weak effect on poverty.
    Keywords: elasticity of poverty, sectoral growth, labor intensity, pro-poor growth.
    JEL: O40 I32 J21
    Date: 2015
  7. By: Patrick Pintus (Aix-Marseille Université (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: In a seminal article, Obstfeld (1994) showed that growth and welfare gains from international risk-sharing arise in a continuous-time stochastic AK model. More precisely, he proved that a portfolio shift from safe and low-return capital to riskier and high-return capital triggers an unambiguous increase in growth. In this note I stress necessary and sufficient conditions ensuring stochastic stability of the exponential balanced-growth path, an issue that has not been addressed by Obstfeld. Not surprisingly, stability requires the average of the wealth growth rate to be positive, which makes clear how mean growth should be defined. Differently, Obstfeld defines mean growth as the growth rate of average wealth, which is smaller than the mean growth rate of wealth under the maintained assumption that wealth is log-normally distributed, because the latter growth concept is risk-adjusted. The two notions of mean growth have very different comparative statics properties both for economies that hold some risk-free capital and for economies that fully specialize in risky capital. Different from Obstfeld’s results, international financial integration increases the stability-related mean growth rate for both complete and incomplete specialization, if risk aversion takes on moderate values and provided that the intertemporal substitution elasticity is smaller than one. Although the welfare computations presented by Obstfeld are preserved, because they ultimately depend on parameter values, this note shows that stochastic stability sheds new light on the mechanisms that trigger growth changes under financial integration and underlines the intuition behind them.
    Keywords: International Financial Integration, Endogenous Growth, Stochastic Stability
    JEL: F34 F43 O40
    Date: 2015–02–04
  8. By: Mayer, Walter J.; Madden, Gary; Dang, Xin
    Abstract: This paper investigates whether predictions of future economic growth can be improved by using standard measures of broadband infrastructure. The investigation is carried out by comparing the predictive accuracy of dynamic panel models of economic growth estimated with and without measures of broadband infrastructure. Tests of predictive accuracy are employed to test the hypothesis that measures of broadband infrastructure can improve predictions of GDP growth after controlling for standard growth determinants.
    Keywords: Broadband speed,economic growth,hypothesis tests,prediction
    Date: 2014
  9. By: Wallace, Frederick; Chapa Cantú, Joana
    Abstract: Building on previous work by Chiquiar (2005) we study the impact of the ejido communal property system on economic growth in the Mexican states. The average growth rate of state per capita GDP is negatively related to the share of state land in the communal ejido system during some of the sub-periods examined. The negative relation suggests that the misallocation of resources related to the limited property rights of ejidatarios has been a binding constraint on the growth of the Mexican states at times during the 1970-2012 period. We also examine the conditional convergence or divergence of the Mexican states for 2003-2012 and 2005-2012 and find that definite conclusions cannot be drawn. Whether state GDP per capita converged or diverged depends on whether the estimations start with 2003 or 2005 and, interestingly, on the specific ejido variable included in the model.
    Keywords: Economic growth, Mexican states, ejido system, property rights
    JEL: O4 O43 O47 O5 O54
    Date: 2015–01–31
  10. By: Lisciandra, Maurizio; Millemaci, Emanuele
    Abstract: This paper provides a within-country analysis of the impact of corruption on economic growth using a panel of Italian regions from 1968 to 2011 through a robust measure of corruption. This measure is averaged over 5-year periods to reduce short-run fluctuations and to reduce probable delayed effects, which are typical for latent phenomena such as corruption. The results show a significant negative impact of corruption on long-term growth in all specifications, both on average and for each Italian region. As a consequence, a zero-level of corruption is growth maximizing. This effect is non-linear such that the negative impact of corruption on growth becomes less intense as corruption increases.
    Keywords: corruption; economic growth; cross-regional analysis; dynamic panel data
    JEL: D73 K4 O10 R11
    Date: 2015–02
  11. By: Tomasz Brodzicki (University of Gdansk; Institute for Development)
    Abstract: This paper addresses the spatial aspects of economic growth at regional level. We review the theoretical and empirical literature on economic growth and new economic geography (NEG) paying particular attention to dynamic NEG models. Both economic growth and location of economic activity are endogenous. Complex interdependencies exist between them and they are only to a limited extent included in the current theoretical models. A review of the literature leads to the conclusion on the existence of a negative relationship between the rate of economic growth at the national level and the degree of differentiation at regional level. Thus, equalization-oriented policy aimed at equilibrating development opportunities may lead to a general slowdown. Emerging theoretical models a la Melitz in the heterogeneous firms models take into account the stochastic distribution of productivity at the firm level lead to interesting conclusions, but at the same time lose clarity and explicitness of generated recommendations. The ideal theoretical model adapted to Polish conditions should be of a dynamic and multi-sector, multi-regional type with core-periphery setup - allowing for hierarchical policentricity and endogenous economic growth (broadly defined capital accumulation), allowing for the flow of goods and factors of production, taking into account imperfect diffusion of knowledge (localized diffusion) . The ultimate version of the model should envisaged random variation in productivity of firms and consumer preferences. At the same time it would not eliminate the problem of the black-boxes. Due to the complexity of the model does not exist, what is more, it is unlikely to be created in the future. In all likelihood, the model would not lead to clear policy conclusions. Its usefulness from the perspective of regional policy would be thus very limited.
    Keywords: economic growth, new economic geography, regional development
    JEL: O40 O43 R11 R12
    Date: 2014–12
  12. By: Douanla Tayo, Lionel; Abomo Fouda, Marcel Olivier
    Abstract: This study aims at assessing the effect of government spending in education on economic growth in Cameroon over the period 1980-2012 using a vector error correction model. The estimated results show that these expenditures had a significant and positive impact on economic growth both in short and long run. The estimated error correction model shows that an increase of 1% of the growth rate of private gross fixed capital formation and government education spending led to increases of 5.03% and 10.145 % respectively in the long-run on economic growth . Education spending thus appears as one of the main driving force of the economic growth process in Cameroon.
    Keywords: Economic growth, VECM.
    JEL: H5
    Date: 2015–02–09
  13. By: Marc Klemp (Department of Economics, University of Copenhagen); Niels Framroze Møller (Department of Economics, University of Copenhagen)
    Abstract: Theories of economic growth hypothesize that the transition from pre-industrial stagnation to sustained growth is associated with a post-Malthusian phase in which technological progress raises income and spurs population growth while offsetting diminishing returns to labor. Evidence suggests that England was characterized by post-Malthusian dynamics preceding the Industrial Revolution. However, given England's special position as the forerunner of the Industrial Revolution, it is unclear if a transitory post-Malthusian period is a general phenomenon. Using data from Denmark, Norway and Sweden, this research provides evidence for the existence of a post-Malthusian phase in the transition from stagnation to growth in Scandinavia.
    Keywords: Demography, Post-Malthusian Dynamics, Malthus, Pre-Industrial Scandinavia, Demographic Transition, Economic Growth, Unified Growth Theory, Malthusian Stagnation, Co-integration, Time Series Analysis
    JEL: C32 N3 O1
    Date: 2015–01–23

This nep-gro issue is ©2015 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.