nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒02‒28
25 papers chosen by
Marc Klemp
Brown University

  1. The Rents From Trade and Coercive Institutions: Removing the Sugar Coating By Christian Dippel ; Avner Greif ; Daniel Trefler
  2. The Impact of War on Resource Allocation: 'Creative Destruction' and the American Civil War By B. Zorina Khan
  3. The Race Between Technology and Human Capital By Nancy L Stokey
  4. The Resource Curse: A Statistical Mirage? By Alexander James
  5. Premature Deindustrialization By Dani Rodrik
  6. Taking Banks to Solow By Gersbach, Hans ; Rochet, Jean-Charles ; Scheffel, Martin
  7. The Effects of Corruption and Seigniorage on Growth and Inflation By Garcia Fortuny, Judit
  8. Population Structure and Consumption Growth: Evidence from National Transfer Accounts. By Michael Kuhn ; Klaus Prettner
  9. Schooling, nation building and industrialization: a Gellnerian approach By Esther Hauk ; Javier Ortega
  10. GDP Growth in Russia: Different Capital Stock Series and the Terms of Trade By Kaitila, Ville
  11. Optimum Growth and Carbon Policies with Lags in the Climate System By Lucas Bretschger ; Christos Karydas
  12. Financial Development and Economic Growth in ASEAN: Evidence from Panel Data By Lerohim, Siti Nor FarahEffera ; Affandi, Salwani ; W. Mahmood, Wan Mansor
  13. Growth and Mitigation Policies with Uncertain Climate Damage By Lucas Bretschger ; Alexandra Vinogradova
  14. Policy co-ordination and growth traps in a middle-income country setting: The case of South Africa By Bhorat, Haroon ; Cassim, Aalia ; Hirsch, Alan
  15. Modeling the causal linkages between nuclear energy, renewable energy and economic growth in developed and developing countries By Anis Omri ; Nejah ben mabrouk ; Amel Sassi-Tmar
  16. Economic Growth, Biodiversity and Conservation Policies in Africa: an Overview By Iritie, Jean-Jacques
  17. Mechanism Between Mining Sector and Economic Growth in Zimbabwe, is it a Resource Curse? By Nyasha Mahonye and Leonard Mandishara
  18. Foreign direct investment, economic growth and structural transformation: The case of West African Economies and Monetary Union Countries By Sandjong Tomi, Diderot Guy D'Estaing
  19. Investment-specific vs Process Innovation in a CGE model of Environmental Policy By Claudio Baccianti ; Andreas Löschel
  20. The Relationship between Disaggregate Energy Consumption, Economic Growth and Environment for Asian Developing Economies By Ali Raza Cheema ; Attiya Yasmin Javid
  21. Causal relationship between financial depth and economic growth: evidence from Asia-Pacific Countries By M. Sani,, Nur Fatin Najwa ; Ismail, Fathiyah ; W. Mahmood, Wan Mansor
  22. Renewable energy consumption, economic growth and CO2 emissions: Evidence from selected MENA countries By Sahbi Farhani
  23. Inflation-Growth Nexus in Africa: Evidence from a Pooled CCE Multiple Regime Panel Smooth Transition Model By Reneé van Eyden ; Tolga Omay ; Rangan Gupta
  24. The main obstacles to firms. growth in Senegal: Implications for the long run By Maurel, Mathilde
  25. What causes economic growth in Malaysia: exports or imports ? By Hashim, Khairul ; Masih, Mansur

  1. By: Christian Dippel ; Avner Greif ; Daniel Trefler
    Abstract: The 19th century collapse of world sugar prices should have depressed wages in the British West Indies sugar colonies. It did not. We explain this by showing how lower prices weakened the power of the white planter elite and thus led to an easing of the coercive institutions that depressed wages e.g., institutions that kept land out of the hands of peasants. Using unique data for 14 British West Indies sugar colonies from 1838 to 1913, we examine the impact of the collapse of sugar prices on wages and incarceration rates. We find that in colonies that were poorly suited for sugar cane cultivation (an exogenous colony characteristic), the planter elite declined in power and the institutions they created and supported became less coercive. As a result, wages rose by 20% and incarceration rates per capita were cut in half. In contrast, in colonies that were highly suited for sugar cane there was little change in the power of the planter elite --- as a result, institutions did not change, the market-based mechanisms of standard trade theory were salient, and wages fell by 24%. In short, movements in the terms of trade induced changes in coercive institutions, changes that are central for understanding how the terms of trade affects wages.
    JEL: F1 F16 N26
    Date: 2015–02
  2. By: B. Zorina Khan
    Abstract: What is the effect of wars on industrialization, technology and commercial activity? In economic terms, such events as wars comprise a large exogenous shock to labor and capital markets, aggregate demand, the distribution of expenditures, and the rate and direction of technological innovation. In addition, if private individuals are extremely responsive to changes in incentives, wars can effect substantial changes in the allocation of resources, even within a decentralized structure with little federal control and a low rate of labor participation in the military. This paper examines war-time resource reallocation in terms of occupation, geographical mobility, and the commercialization of inventions during the American Civil War. The empirical evidence shows the war resulted in a significant temporary misallocation of resources, by reducing geographical mobility, and by creating incentives for individuals with high opportunity cost to switch into the market for military technologies, while decreasing financial returns to inventors. However, the end of armed conflict led to a rapid period of catching up, suggesting that the war did not lead to a permanent misallocation of inputs, and did not long inhibit the capacity for future technological progress.
    JEL: N11 N4 O3 O51
    Date: 2015–02
  3. By: Nancy L Stokey (Department of Economics )
    Abstract: This paper develops a model in which heterogenous firms invest in R&D to improve technology, and heterogeneous workers invest in human capital to increase their earnings. Both investment technologies have stochastic components, and the balanced growth path has stationary, nondegenerate distributions of technology and human capital. Technology and human capital are complements in production, so the labor market produces assortative matching between firms and workers: firms with higher productivity employ higher quality workers and pay higher wages. Thus, wage differentials across firms have two sources: differences in firm productivity and differences in labor quality.
    Date: 2014
  4. By: Alexander James
    Abstract: A surprising feature of resource-rich economies is slow growth.  It is often argued that natural-resource production impedes development by creating market or institutional failures.  This paper establishes an alternative explanation -  a slow-growing resource sector.  A declining resource sector is disproportionately reflected in resource-dependent countries.  Additionally, there is little evidence that resource dependence impedes growth in non-resource sectors.  More generally, this paper illustrates the importance of considering industry composition in cross-country growth regressions.  
    Keywords: Resource Dependence, Economic Growth, Resource Curse
    JEL: Q2 Q3 O1
    Date: 2014–10–01
  5. By: Dani Rodrik
    Abstract: I document a significant deindustrialization trend in recent decades, that goes considerably beyond the advanced, post-industrial economies. The hump-shaped relationship between industrialization (measured by employment or output shares) and incomes has shifted downwards and moved closer to the origin. This means countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers. Asian countries and manufactures exporters have been largely insulated from those trends, while Latin American countries have been especially hard hit. Advanced economies have lost considerable employment (especially of the low-skill type), but they have done surprisingly well in terms of manufacturing output shares at constant prices. While these trends are not very recent, the evidence suggests both globalization and labor-saving technological progress in manufacturing have been behind these developments. Premature deindustrialization has potentially significant economic and political ramifications, including lower economic growth and democratic failure.
    JEL: O14
    Date: 2015–02
  6. By: Gersbach, Hans ; Rochet, Jean-Charles ; Scheffel, Martin
    Abstract: We develop a simple integration of banks into the Solow model. The objective is to provide a tractable benchmark for analyzing the long-term impact of crises on economic activities and growth. A fraction of firms have to rely on banks for financing their investments while banks face themselves an endogenous leverage constraint. Informed lending by banks and uninformed lending through capital markets spur capital accumulation. The ensuing coupled accumulation rules for household wealth and bank equity yield a uniquely determined steady state. We highlight three properties when shocks to wealth, productivity or trust affect the economy. First, typically bond and loan financing react in opposite directions to such shocks. Second, negative temporary shocks to household wealth (financial crisis) or negative sectoral production shocks can surprisingly cause persistent booms of banking and even of the entire economy -- after an initial bust. Third, shocks to bank equity (banking crisis), however, lead to large and persistent downturns associated with high output losses.
    Keywords: economic activity and growth; financial intermediation; impact of banking and financial crises; Solow model
    JEL: E21 E32 F44 G21 G28
    Date: 2015–02
  7. By: Garcia Fortuny, Judit
    Abstract: In the last two decades, cases of corruption have been unveiled in different countries, raising public awareness and reinforcing a trend in which society expects more from their leaders. Our objective in this paper is to examine the effects of corruption and seigniorage on inflation and growth rates. The model used in this article is an extension of the model used by Huang and Wei (2006). We find interesting results and one of them is that, under some conditions, corruption has a positive impact on the growth rate. JEL classification : D73, E52, E58, E62. Keywords : Corruption; Fiscal Policy; Growth; Monetary Policy; Seigniorage.
    Keywords: Corrupció, Política monetària, Bancs centrals, Política fiscal, Creixement econòmic,
    Date: 2014
  8. By: Michael Kuhn ; Klaus Prettner
    Abstract: We assess the impact of population structure on economic growth. Following recent research, we focus on the generational turnover as a key driver of consumption growth. We characterize the impact of the average birth and death rates on the generational turnover, depending on the age-profile of consumption and on the extent of annuity market imperfection. Using recent data from the National Transfer Accounts on consumption profiles for a number of countries, we assess in a comparative way the sign and magnitude of generational turnover and its impact on consumption growth. We find considerable cross-country variation and trace it back to differences in demographic rates and in the consumption structure.
    Keywords: Demography, Economic Growth, Generational Turnover, National Transfer Accounts.
    Date: 2015–01
  9. By: Esther Hauk ; Javier Ortega
    Abstract: We model a two-region country where value is created through bilateral production between masses and elites (bourgeois and landowners). Industrialization requires the elites to finance schools and the masses to attend them. Schooling raises productivity, particularly for matches between masses and bourgeois. At the same time, only country-wide education ("unified schooling") renders the masses mobile across regions. Alternatively, schools can be implemented in one region alone ("regional education") or the regionally dominant group can choose to implement schooling in its own region but refuse to share the costs/proceeds within the wider country-level group (.secession.). We show that schools are more likely to be set-up when the bourgeoisie dominates, but that this is not necessarily socially efficient. Unified schooling is always chosen if the identity of the dominant elite at the regional and country level is the same and/or the industrialization shock is sufficiently high. If instead the bourgeoisie is dominant in one region and landowners are dominant countrywise, the bourgeoisie of that region may promote the secession of the region, and this can be socially efficient. The model is shown to be consistent with evidence for 19th century France and Spain.
    Keywords: Nation-building; education; industrialization
    JEL: D02 I2 N00 O14
    Date: 2015–02
  10. By: Kaitila, Ville
    Abstract: There are different academic assessments as to what lies behind Russia’s GDP growth: total factor productivity or fixed capital investments. Studies that reconstruct capital stocks for Russia using gross fixed capital formation and the perpetual inventory method tend to lean towards the former answer, while capital services datasets that have recently been made available lean towards the latter. We reconstruct a capital stock series for Russia for 1995–2013, and compare the results to two capital services time series using the Solow growth model. We also take into account terms of trade developments that have lent strong support to the economy.Finally, we use these tools to construct four possible scenarios for Russia’s economic growth up until 2030.
    Date: 2015–02–25
  11. By: Lucas Bretschger ; Christos Karydas
    Abstract: We study the effects of greenhouse gas emissions on optimum growth and climate policy by using an endogenous growth model with polluting non-renewable resources.  Climate change harms the capital stock.  Our main contribution is to introduce and extensively explore the naturally determined time lag between greenhouse gas emissions and the damages due to climate change, which proves to be crucial for the trasition of the ecnomy towards its steady state.  The social optimum and the optimal abatement policies are fully characterized.  The inclusion of a green technology delays optimal resource extraction.  The optimal tax rate on emissions is proportional to ouptut.  Poor understanding of the emissions diffusion process leads to suboptimal carbon taxes and suboptimal growth and resource extraction.
    Keywords: Non-Renewable Resource Dynamics, Pollution Diffusion Lag, Optimum Growth, Clean Energy, Climate Policy
    JEL: Q54 O11 Q52 Q32
    Date: 2014–08–01
  12. By: Lerohim, Siti Nor FarahEffera ; Affandi, Salwani ; W. Mahmood, Wan Mansor
    Abstract: The objective of this paper is to examine the influence of financial development consisting of financial depth, investment share and inflation on economic growth of ASEAN during 2002 through 2011. Using the fixed effect panel data OLS regression estimations, the study shows that share investment and inflation plays an important role in explaning real output. However, it is quite surprise to see that financial depth does not have any significant contribution toward real output. The findings is very important to policymaker for the ASEAN. They should aim at improving capital market environment and at the same time try reducing inflation rate to a level that can be sustainable for their future economic growth.
    Keywords: Economic growth, Financial depth, Investment share, Inflation, Association of Southeast Asian Nations (ASEAN).
    JEL: G0 G1 G2
    Date: 2014–09–25
  13. By: Lucas Bretschger ; Alexandra Vinogradova
    Abstract: Climate physics predicts that the intensity of natural disasters will increase in the future due to climate change.  One of the biggest challenges for economic modeling is the inherent uncertainty of climate events, which crucially affects consumption, investment, and abatement decisions.  We present a stochastic model of a growing economy where natural disasters are multiple and random, with damages driven by the economy's polluting activity.  We provide a closed-form solution and show that the optimal path is characterized by a constant growth rate of consumption and the capital stock until a shock arrives, triggering a downward jump in both variables.  Optimum mitigation policy consists of spending a constant fraction of output on emissions abatement.  This fraction is an increasing function of the arrival rate, polluting intensity of output, and the damage intensity of emissions.  A sharp response of the optimum growth rate and the abatement share to changes in the arrival rate and the damage intensity justifies more stringent climate policies as compared to the expectation-based scenario.  We subsequently extend the baseline model by adding climate-induced fluctuations around the growth trend and stock-pollution effects, demonstrating robustness of our results.  In a quantitative assessment of our model we show that the optimal abatement expenditure at the global level may represent 0.9% of output, which is equivalent to a tax of $71 per ton carbon.
    Keywords: Climate policy, uncertainty, natural disasters, endogenous growth
    JEL: O10 Q52 Q54
    Date: 2014–08–04
  14. By: Bhorat, Haroon ; Cassim, Aalia ; Hirsch, Alan
    Abstract: South Africa has exhibited tepid economic growth over the past twenty years as well as high levels of income inequality characteristic of a middle income country growth trap. This paper compares and contrasts South Africa.s growth trap relative to middle
    Keywords: South Africa, growth trap, middle income country, policy co-ordination, industrial policy
    Date: 2014
  15. By: Anis Omri ; Nejah ben mabrouk ; Amel Sassi-Tmar
    Abstract: This paper investigates the causal relationship among energy consumption (i.e., nuclear energy and renewable
    Keywords: Nuclear energy, Renewable energy, Economic growth, Simultaneous-equation models.
    Date: 2015–02–10
  16. By: Iritie, Jean-Jacques
    Abstract: From the economic literature on the relationship between economic growth and environment pioneered by Grossman and Krueger (1991) and Shafik and Bandyopadhyay (1992) we first conduct a theoretical and critical reflection on the existence of a Kuznets curve for biodiversity. It appears that results are strongly contrasted. Then, we focus on the main biodiver- sity conservation policies implemented in Africa, i.e. protected areas and we discuss its effectiveness in achieving the dual objective of conservation and economic development for local communities.
    Keywords: Economic growth; environmental Kuznets curve; biodiversity conservations policies; proteced areas; Africa
    JEL: Q01 Q50 Q57
    Date: 2015–02–09
  17. By: Nyasha Mahonye and Leonard Mandishara
    Abstract: The study investigates the role of mineral resources in economic development and sees how the extractive sector impacts the overall performance of the economy of a country endowed with a diverse minerals and metals. We analyzed the economic growth model using human capital, population growth, property rights, and political rights, share of mineral exports to total exports, real growth of mining, real growth of agriculture, real growth of manufacturing and growth in foreign direct investments for the period 1970 - 2008. In addition, the study employed the Ordinary Least Squares (OLS) since it is the widely used model in the field of study. The empirical results showed that real manufacturing growth, real mining growth, share of mineral exports to total exports, property rights and political rights are important determinants of economic growth. Of major importance the study accepts the hypothesis of the presence of a resource curse in Zimbabwe. Actually for the period under review the study could not reject the hypothesis that mineral resources have a negative impact on growth using both variables used to proxy resource abundance. The policy makers therefore ought to improve the management of mineral resources to realize economic gains from these endowments. Keywords: Mineral resources, institutions, economic growth and OLS estimation. JEL classification: Q5
    Keywords: Mineral resources, institutions, economic growth and OLS estimation
    JEL: Q5
    Date: 2015
  18. By: Sandjong Tomi, Diderot Guy D'Estaing
    Abstract: This article examines the long run relationship and the causality between the growth of GDP per capita and FDI in WAEMU countries. Thereafter, it measures the impact of FDI on Total Factor of Productivity (TFP) in the short and long run, for different values of the depreciation of capital stock. Using observation between 1970 and 2012, the econometric analysis provides three key results. First, there is a strong evidence of long run relationship between the growth of GDP per capita and the ratio of FDI inflows. Second, there is bidirectional causality between these two variables. Third, there is a positive and significant effect of FDI on TFP in the long run, conditional on low level of depreciation of capital stock. Therefore, for policy implications, WAEMU countries should intensify their investment in education and health in order to boost the quality of human capital stock and sufficient absorptive capacity necessary to acquire technological transfer from FDI. They should also strengthen their openness, to attract FDI inflows, and invest in infrastructure to better control the depreciation of physical capital stock.
    Keywords: FDI, Economic growth, structural transformations, WAEMU
    JEL: E65 R11
    Date: 2015–02–17
  19. By: Claudio Baccianti ; Andreas Löschel
    Abstract: The European Union has implemented demand push and technology pull policies to foster innovation on the energy and resource efficiency of capital goods. The state of the art of general equilibrium modelling applied to environmental policy rarely treats product and process innovation separately and product quality is, in the best case, exogenous. We develop a dynamic multi-sector CGE model that distinguishes between R&D-based process innovation for all firms, endogenous product innovation in the capital good sector and adoption decisions with respect to the installation of new capital vintages in the rest of the economy. Our results support the previous literature in finding that aggregate innovation declines following an energy tax but whereas process innovation is reduced, product innovation actually rises. We find that demand pull policies are less effective than product-related R&D subsidies to reduce aggregate energy intensity.
    Keywords: Ecological innovation, Economic growth path, Industrial policy, Innovation, Innovation policy, Intangible assets, New technologies, Sustainable growth
    JEL: O31 O40 O41
    Date: 2015–02
  20. By: Ali Raza Cheema (Pakistan Institute of Development Economics, Islamabad ); Attiya Yasmin Javid (Pakistan Institute of Development Economics, Islamabad )
    Abstract: This study evaluates the link between disaggregate energy consumption (coal, petroleum, electricity, renewable energy consumption), economic growth and environment for Asian Developing countries. Cointegration tests verify long run relationship among energy consumption and growth, energy consumption and environment degradation along with trade openness and financial development as control variables. To find long run elasticities fully modified OLS is used, which confirms that all forms of disaggregate energy consumption explain positive and significant impact on economic growth. Results also show that all forms of disaggregate energy use more pollute environment (except coal consumption) and also validate the existence of Environmental Kuznets curve. Important policy implication is that government needs to promote renewable energy sector because its increase economic growth and its impact on environment degradation is low as compare to other sources. Investment in renewable energy sector is beneficial for private and public sector after conducting cost and benefit analysis.
    Keywords: Disaggregate Energy Consumption, Economic Growth, CO2 Emissions, Environmental Kuznets Curve
    Date: 2015
  21. By: M. Sani,, Nur Fatin Najwa ; Ismail, Fathiyah ; W. Mahmood, Wan Mansor
    Abstract: This study investigates the causality between financial depth and the economic performance of five selected large Asia-Pacific Countries consisting of China, India, Korea, Australia and New Zealand. Using pooled OLS regression for 20 year period annual data (1991-2012), the study finds bi-directional long-run causality between financial depth and economic growth. The study also find that ancillary variables such as inflation and investment share significant and positively caused economic growth. However, when financial depth become dependent variable only investment share provide clear relationship. The important implication for policy maker is that they should either improved financial markets or economic activities for future development and sustainability.
    Keywords: : Economic growth, financial depth, investment share, inflation, Asia- Pacific Countries
    JEL: G1 G15 O16 O2
    Date: 2014–09–25
  22. By: Sahbi Farhani
    Abstract: This paper uses panel cointegration techniques to examine the causal relationship between renewable energy consumption, economic growth and CO2 emissions for a group of 12 MENA countries covering the annual period 1975-2008. The Granger-causality results indicate that there is no causal relationship between these variables in short run except a unidirectional causality running from renewable energy consumption to CO2 emissions. However, we find unidirectional causality running from economic growth and CO2 emissions to renewable energy consumption in long run. With panel FMOLS and DOLS estimates, we find that only CO2 emissions have an impact on renewable energy consumption. These results indicate that MENA countries don’t find the best policy which can control the regulation of the renewable energy prices, which can help to take into account the stability in the economic growth structure, and which can also mitigate pollutant emissions.
    Keywords: Renewable energy consumption, Economic growth, CO2 emissions, MENA countries
    JEL: C33 Q43
    Date: 2015–02–10
  23. By: Reneé van Eyden (Department of Economics, University of Pretoria ); Tolga Omay (Cankaya University, Turkey ); Rangan Gupta (Department of Economics, University of Pretoria )
    Abstract: This paper analyses the empirical relationship between inflation and growth using a panel data estimation technique, Multiple Regime Panel Smooth Transition Regression (MR-PSTR), which takes into account the nonlinearities in the data. By using a panel data set for 10 African countries that permit us to control for unobserved heterogeneity at both country and time levels, we find that a statistically significant negative relationship exists between inflation and growth for the inflation rates above the critical threshold levels of 9% and 30% which are endogenously determined. Furthermore, we remedy the cross section dependence with the Common Correlated Effects (CCE) estimator.
    Keywords: Inflation, growth, threshold effects, multiple regime panel smooth transition regression model, cross section dependence, common correlated effects
    JEL: C33 E31 O40
    Date: 2015–02
  24. By: Maurel, Mathilde
    Abstract: Productivity gains are the prime engine of economic growth. This paper uses a rich amount of firms. accounting information from the Single Information Collecting Centre in Senegal over the period 1998-2011. To investigate the two main obstacles to growth,
    Keywords: productivity dynamics, total factor productivity, education, electricity supply
    Date: 2014
  25. By: Hashim, Khairul ; Masih, Mansur
    Abstract: Most of previous researches have only focused on the effect of export expansion on economic growth while ignoring the potential of import in developing economic growth. This study makes an attempt to examine the relationship between trade and economic growth in Malaysia with emphasis on both the role of exports and imports. This study treats exports and imports separately to allow for the possibility that their influence toward economic growth is asymmetric and adopts recent advances in time series modeling. This study used Granger causality test and impulse response functions to examine whether growth in trade stimulates economic growth. It is important to examine the linkage between trade and economic growth for Malaysia in order to provide evidence whether rapid economic growth in the region is driven by trade or whether there is reciprocal impact between growth and trade. The results tend to suggest that the singular focus of past studies on exports as engine of growth may be misleading. The results confirm the bidirectional long run relationships between the economic growth and exports, economic growth and imports and exports and imports. From a policy point of view, investigating the causal links between trade and economic growth generates important implications for the development strategies of developing countries. If exports drive economic growth, policy should promote exports, and likewise for imports.
    Keywords: economic growth, exports, imports, time series techniques
    JEL: C22 C58 F1
    Date: 2014–08–14

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