nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒03‒13
eleven papers chosen by
Marc Klemp
Brown University

  1. Population Dynamics and Long-Run Economic Growth By Casey, Gregory; Galor, Oded
  2. A Lipsetian Theory of Institutional Change By Raouf Boucekkine; Paolo G. Piacquadio; Fabien Prieur
  3. Adam Smith, Watch Prices, and the Industrial Revolution By Morgan Kelly; Cormac Ó Gráda
  4. Ethnic divisions, political institutions and the duration of declines: A political economy theory of delayed recovery By Bluhm R; Thomsson K.M.
  5. Revisiting Growth Empirics Based on IV Panel Quantile Regression By Lijuan Huo; Tae-Hwan Kim; Yunmi Kim
  6. Participative Political Institutions and City Development 800Ð1800 By Fabian Wahl
  7. The accumulation of capital and economic growth in Brazil. A long-term prospective (1950-2008) By Mateo Tomé, Juan Pablo
  8. Robots at Work By Georg Graetz; Guy Michaels
  9. Non-residential capital stock in Latin America. 1875-2008 By Xavier Tafunell; Cristián Ducoing
  10. Sustainable growth and financial markets in a natural resource rich country By Emma Hooper
  11. The Importance of Reallocation for Productivity Growth: Evidence from European and US Banking By Bos, Jaap W.B.; van Santen, Peter C.

  1. By: Casey, Gregory; Galor, Oded
    Abstract: This paper applies insights from theoretical and empirical research in economic growth to analyze the impacts of policies affecting fertility, migration and human capital accumulation on growth and poverty alleviation. It underlines the tradeoff between having more children and investing more resources in the human capital of each child as a critical force in devising policies that will alleviate hardship and generate long-term prosperity. In developing countries, policies increasing the return to education would trigger a virtuous cycle of fertility control, investment in education, poverty alleviation, and economic growth. Moreover, permitting migration of high skilled individuals to developed countries would mitigate the issues associated with aging populations in those societies, while encouraging human capital formation in developing countries.
    Keywords: Fertility, Demographic Structure, Unified Growth Theory, Migration
    JEL: J13 J16 J24 O15 O40
    Date: 2014–10
  2. By: Raouf Boucekkine (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS); Paolo G. Piacquadio (Department of Economics, University of Oslo); Fabien Prieur (INRA-LAMETA and University of Montpellier)
    Abstract: The paper addresses the role of education policies for institutional change. Our paradigmatic model consists of an autocratic elite and a mass of hand-to-mouth workers. The elite has full political and economic control. First, it anticipates and can avoid revolutionary threats through income redistribution. Second, it sets the education policy: a higher level of human capital results in a larger productivity of the national industry, but also in higher consumption aspirations of citizens (and thus more costly redistribution). Finally and in contrast to the recent literature on democratization games, the elite can stop the autocracy and initiate an institutional change. We show that perspective economic returns on education and resources play a crucial role: if sufficiently high, these may prompt high investment in education, human capital accumulation, and, eventually, an institutional change. Our theory of institutional change captures three essential dimensions of Lipset’s view: the positive relationship between education and institutional change, the positive relationship between income and institutional change and, in a more stylized fashion, the negative relationship between inequality and institutional change.
    Keywords: democratization, human capital, Lipset’s theory
    Date: 2015–02–23
  3. By: Morgan Kelly (University College Dublin); Cormac Ó Gráda (University College Dublin)
    Abstract: Although largely absent from modern accounts of the Industrial Revolution, watches were the first mass produced consumer durable, and were Adam Smith’s pre-eminent example of technological progress. In fact, Smith makes the notable claim that watch prices may have fallen by up to 95 per cent over the preceding century; a claim that this paper attempts to evaluate. We look at changes in the reported value of over 3,200 stolen watches from records of criminal trials in the Old Bailey court in London from 1685 to 1810. Before allowing for quality improvements we find that the real price of watches in nearly all categories falls steadily by 1.3 per cent per year, equivalent to a fall of 75 per cent over a century, a rate considerably above the growth rate of average labour productivity in British industry in the early nineteenth century.
    Keywords: Watch prices, Adam Smith, Industrial Revolution
    JEL: N0
    Date: 2015–03–02
  4. By: Bluhm R; Thomsson K.M. (UNU-MERIT)
    Abstract: This paper analyzes the duration of large economic declines and provides a theory of delayed recovery. First, we develop a formal political economy model that illustrates a simple mechanism of how weak constraints on the political executive can lead to longer declines in ethnically heterogeneous countries. The model shows how uncertain post-recovery incomes and a winner-take-all threshold effect create a commitment problem rendering a cooperative equilibrium inaccessible. Holding out can benefit groups by reducing the threshold effects in subsequent periods, thus limiting the remaining uncertainty. Placing strong constraints on the executive solves this commitment problem by reducing the uncertainty from the threshold effects, which brings about cooperation earlier on. Second, we then test several empirical predictions from the model using standard data on linguistic heterogeneity and more detailed data on ethnic power configurations. We find that the partial correlations are consistent with the proposed theory. The effect of executive constraints on the length of declines is very large in heterogeneous countries, but practically disappears in ethnically homogeneous societies. The adverse effect of heterogeneity is driven by the number of groups; increasing political concentration works in the opposite direction.
    Keywords: Economics of Minorities, Races, and Immigrants; Non-labor Discrimination; Institutions and Growth;
    JEL: O43 J15
    Date: 2015
  5. By: Lijuan Huo (Beijing Institute of Technology); Tae-Hwan Kim (Yonsei University); Yunmi Kim (University of Seoul)
    Abstract: We analyze the well-known issue of economic growth convergence using quantile regres- sion. Most previous studies have used a least squares (LS) method or variation, which focuses on the issue only at the mean of the growth rate. Therefore, such results cannot provide a satisfactory answer to what can happen if the growth rate is far from the conditional mean level. For example, we consider the following question: do we still have economic growth convergence or is the conver- gence speed changed in a low growth period such as the ?Great Recession,?that started in 2008? We propose using IV panel quantile regression to answer the question. Our empirical ?ndings demonstrate that economic growth convergence occurs at all quantiles over the entire conditional distribution, but that the convergence speed does depend on quantiles; the convergence speed is much higher when the GDP growth rate is at either high or low quantiles.
    Keywords: Quantile regression; panel data; endogeneity; growth convergence.
    JEL: O4 C2
    Date: 2014–12
  6. By: Fabian Wahl (University of Hohenheim)
    Abstract: This study investigates the effect of participative political institutions (PPIs) that emerged in many central European cities from the late 13th century. The empirical analysis of the paper is based on newly compiled long-run data for the existence of different types of PPIs in 104 cities in the Holy Roman Empire. The effect of both an overall index of participativeness of political institutions as well as of the individual PPIs is tested empirically. When pooled over all periods and observations, there seems to be a significant positive overall effect of PPIs in the German-speaking area but not in the Low Countries. The study founds considerable spatial and temporal heterogeneity in the effect of PPIs. Furthermore, the effect of different types of PPIs differs substantially and in general seems to be short-lived. That is, the results show that the positive initial effect of some PPIs declined the longer they existed and over time.
    Keywords: Medieval Period, Early-Modern Period, Central Europe, City Development, Political Institutions, Early Democracy, Guilds
    JEL: N44 N94 O10 R11 H11 D72
    Date: 2015–03
  7. By: Mateo Tomé, Juan Pablo (Kingston University London)
    Abstract: This article analyses the development of economic growth in Brazil in terms of capital accumulation, following the Marxist approach. The aim is to identify the relationship between the two processes, looking at the profit rate, which along with investment effort determines productive investment. In turn, this one affects the capital-labour ratio and labour productivity. Both, with the addition of the price ratio, determine the productivity of capital, a key variable in understanding the accumulation process in Brazil. Using the period 1950-2008 allows comparing two phases in the Brazilian economy, the period of substitutive industrialisation and the neoliberal phase, all from the perspective of the relationship between the aforementioned variables.
    Keywords: growth; investment; profitability; productivity
    JEL: E11 E22 E32 N16 O40
    Date: 2015–03–04
  8. By: Georg Graetz; Guy Michaels
    Abstract: Despite ubiquitous discussions of robots' potential impact, there is almost no systematic empirical evidence on their economic effects. In this paper we analyze for the first time the economic impact of industrial robots, using new data on a panel of industries in 17 countries from 1993-2007. We find that industrial robots increased both labor productivity and value added. Our panel identification is robust to numerous controls, and we find similar results instrumenting increased robot use with a measure of workers' replaceability by robots, which is based on the tasks prevalent in industries before robots were widely employed. We calculate that the increased use of robots raised countries' average growth rates by about 0.37 percentage points. We also find that robots increased both wages and total factor productivity. While robots had no significant effect on total hours worked, there is some evidence that they reduced the hours of both low-skilled and middle-skilled workers.
    Keywords: Robots, productivity, technological change
    JEL: E23 J23 O30
    Date: 2015–03
  9. By: Xavier Tafunell; Cristián Ducoing
    Abstract: This work offers non-residential capital stock estimation for major Latin American economies – Argentina, Brazil, Chile and Mexico - made towards a homogeneous method. This work covers the whole twentieth century and the years of the XXI century, expanding backward half century the present available estimations. Our research has the virtue of creating a capital stock method that could be applied to almost all Latin American economies, using the gross fixed capital formation data base (1850–1950) elaborated by one of the authors. This data could be linked with the investment series of standardized National Accounts of the Region, by ECLAC (Economic Commission for Latin America and the Caribbean). Also, the authors have done a comparison between Latin American countries and most advanced economies, especially on the comparative performance of two settlers countries, Argentina and Australia.
    Keywords: Capital Stock, Latin America, Gross fixed capital formation, National Accounts.
    JEL: N16 E22 E01
    Date: 2015–03
  10. By: Emma Hooper (_Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS)
    Abstract: We study the optimal growth path of a natural resource rich country, which can borrow from international financial markets. More precisely, we explore to what extent international borrowing can overcome resource scarcity in a small open economy, in order to have sustainable growth. First, this paper presents a benchmark model with a constant interest rate. We then introduce technical progress to see if the economy's growth can be sustainable in the long-run. Secondly, we analyse the case of a debt elastic interest rate, with a constant price of natural resources and then with increasing prices. The main finding of this paper is that borrowing on international capital markets does not permit sustainable growth for a country with exhaustible natural resources, when the interest rate is constant. Nevertheless, when we endogenize the interest rate the consumption growth rate can be positive before declining.
    Keywords: Exhaustible natural resources, exogenous growth, financial markets
    JEL: E20 O40 Q32 E44
    Date: 2015–02–15
  11. By: Bos, Jaap W.B. (Maastricht University School of Business and Economics); van Santen, Peter C. (Research Department, Central Bank of Sweden)
    Abstract: To what extent has input reallocation contributed to aggregate productivity growth in the banking sectors of Europe and the United States? Interestingly, under-performing banks capture market share, while more productive banks lose market share, in particular in the US. The pattern of reallocation is markedly different between the geographical regions: European productivity has grown by reallocating inputs through the first half of the sample period, at the same time when reallocation diminished growth in the US. The long-run positive effects of creative destruction are especially apparent in the US, where reallocation is an important driver of increases in productivity.
    Keywords: reallocation; productivity growth; efficiency; banking
    JEL: C24 D24 O30 O47
    Date: 2015–02–01

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