nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒03‒22
eight papers chosen by
Marc Klemp
Brown University

  1. Trade and Productivity: The Family Connection Redux By Klaus Prettner; Holger Strulik
  2. Malthusian pressures: Empirical evidence from a frontier economy By Geloso, Vincent; Kufenko, Vadim
  3. The growing dependence of Britain on trade during the Industrial Revolution By Kevin Hjortshøj O'Rourke; Gregory Clark; Alan M. Taylor
  4. Smith, Malthus and Recent Evidence in Global Population Dynamics By Xiao Jiang; Luis Villanueva
  5. Growth and Human Capital: A Network Approach By Cavalcanti, Tiago; Giannitsarou, Chryssi
  6. Toward an Understanding of Economic Growth in Africa: A Re-Interpretation of the Lewis Model By Xinshen Diao; Margaret McMillan
  7. Effect of bank capital requirements on economic growth By Natalya Martynova
  8. Optimal Growth with Polluting Waste and Recycling By Raouf Boucekkine; Fouad El Ouardighi

  1. By: Klaus Prettner; Holger Strulik
    Abstract: We investigate the effects of human capital accumulation on trade and productivity by integrating a micro-founded education and fertility decision of households into a model of international trade with firm heterogeneity. Our theoretical framework leads to two testable implications: i) the export share of a country increases with the education level of its population, ii) the average profitability of firms located in a country also increases with the education level of its population. We find that these implications are supported by empirical evidence for a panel of OECD countries from 1960 to 2010.
    Keywords: firm heterogeneity, international competiveness, education, fertility decline
    JEL: F12 F14 I20 J11
    Date: 2015–03
  2. By: Geloso, Vincent; Kufenko, Vadim
    Abstract: In this paper we study Malthusian pressures in a frontier economy. Using the empirical data on the real prices and demographic variables from 1688 to 1860 for Quebec and Montreal, we test for the existence of Malthusian pressures. Bearing in mind the particularities of frontier economies and the development of the Canadian economy, we conduct cointegration tests and VARs in order to identify positive and preventive checks. The cointegration test reveals absence of long-run equilibrium relationship between real wheat prices, birth and death rates. Using the Bai-Perron test we find a structural break in 1767 and divide the sample in pre- and post-conquest periods. We find that the positive checks were operating in the years prior to the conquest but that they faded during the nineteenth century. In the short-run, we find that wheat prices Granger-cause fluctuations in death rates in the pre-conquest period.
    Keywords: Malthusian economy,preventive check,positive check,Canadian history,empirical analysis
    JEL: J11 N11 E32
    Date: 2015
  3. By: Kevin Hjortshøj O'Rourke; Gregory Clark; Alan M. Taylor
    Abstract: Many previous studies of the role of trade during the British Industrial Revolution have found little or no role for trade in explaining British living standards or growth rates.  We construct a three-region model of the world in which Britain trades with North America and the rest of the world, and calibrate the model to data from the 1760s and 1850s.  We find that while trade had only a small impact on British welfare in the 1760s, it had a very large impact in the 1850s.  This contrast is robust to a large range of parameter perturbations.  Biased technological change and population growth were key in explaining Britain's growing dependent on trade during the Industrial Revolution.
    Keywords: British Industrial Revolution, Great Divergence, trade, colonies, growth, specialization
    JEL: F11 F14 F43 N10 N70 O40
    Date: 2014–03–10
  4. By: Xiao Jiang (Department of Economics, Denison University); Luis Villanueva (Department of Economics, Denison University)
    Abstract: In conventional economic theories, population is determined outside of the economic system. However, classical political economists such as Adam Smith and Thomas Malthus have long argued for the endogenous determination of population, hence establishing a connection between eco- nomics and demography. Foley (2000) used empirically established global per capita output-fertility schedule based on the 1960-1992 Extended Penn World Tables to project the population stabilizing level of world per capita output and population. In this paper we intend to update this line of re- search using more recent empirical evidences. We find that the world production still exhibits strong pattern of Smithian increasing returns to scale, and most countries' population have been stabilizing along a con- vex path in the income-fertility schedule. Our projection suggests that the world population will stabilize at per capita income around $ 13,550 in 2005 PPP, and by the year of 2011, the world per capita output was still about $2,824 short. The world population will stabilize around 10 billion assuming the absence of any exogenous shocks to the empirically established global income-fertility relation.
    Keywords: Growth, Demographic Equilibrium, Classical Economics
    JEL: B12 J11
    Date: 2015–03
  5. By: Cavalcanti, Tiago; Giannitsarou, Chryssi
    Abstract: We study the interactions and dynamics of human capital, growth and inequality by explicitly embedding networks into a standard endogenous growth model with overlapping generations. The human capital of a household depends on investment in education and on average human capital of the household's network neighborhood. Network structure is crucial for both the long run outcomes and the transition of otherwise identical economies. Network cohesion above a certain threshold eliminates differences across households and leads to long run equality, while below the threshold, inequality is high and persists more often. During transition, (i) high overall growth is achieved when the network has high degree centralization and the most degree central node has high initial human capital and (ii) high individual household growth is achieved when the household has low human capital relative to its neighborhood and is located in a neighborhood that has high average human capital relative to the whole economy.
    Keywords: growth; human capital; inequality; local externality; networks
    JEL: D62 D85 E24 O40
    Date: 2015–03
  6. By: Xinshen Diao; Margaret McMillan
    Abstract: Africa’s recent economic growth is at a historical high. The patterns associated with this growth appear to be quite different from the Asian experiences where rapid growth was fueled by labor intensive, export-oriented manufacturing. Because this pattern differs with our typical view of structural transformation, a heated debate has begun over the sustainability of Africa’s growth. One thing is clear: the recent growth is not well understood. Against this background, we adapt Lewis’s (1954) dual-economy model to the economies of Africa to better understand the role that the “in-between” sector as defined by Lewis (1979) has played in Africa’s recent growth. Our framework incorporates the coexistence of a closed and an open modern economy and takes into account the diversity and heterogeneity of the activities that characterize modern African economies. We apply this framework to the economy of Rwanda to assess Rwanda’s future growth prospects based on different levels of foreign capital inflows. We find that higher foreign inflows lead to significantly more growth in the closed modern economy and stagnant growth in the open modern economy, a phenomenon consistent with recently observed patterns of growth across several African countries.
    JEL: O11 O55
    Date: 2015–03
  7. By: Natalya Martynova
    Abstract: This paper reviews studies exploring how higher bank capital requirements affect economic growth. There is little evidence of a direct effect; research focuses on the indirect effects of capital requirements on credit supply, bank asset risk, and cost of bank capital, which in turn can affect economic growth. Banks facing higher capital requirements can reduce credit supply as well as decrease credit demand by raising lending rates which may slow down economic growth. However, having better-capitalized banks enhances financial stability by reducing bank risk-taking incentives and increasing banks' buffers against losses.
    Keywords: bank capital requirement; credit growth; financial stability; economic growth; cost of equity
    JEL: G21 G28
    Date: 2015–03
  8. By: Raouf Boucekkine (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS); Fouad El Ouardighi (ESSEC Business School)
    Abstract: We study an optimal AK-like model of capital accumulation and growth in the presence of a negative environmental externality in the tradition of Stokey (1998). Both production and consumption activities generate polluting waste. The economy exerts a recycling effort to reduce the stock of waste. Recycling also generates income, which is fully devoted to capital accumulation. The whole problem amounts to choosing the optimal control paths for consumption and recycling to maximize a social welfare function that notably includes the waste stock and disutility from the recycling effort. We provide a mathematical analysis of both the asymptotic behavior of the optimal trajectories and the shape of transition dynamics. Numerical exercises are performed to illustrate the analysis and to highlight some of the economic implications of the model.
    Keywords: Capital accumulation, sustainability, waste, recycling.
    JEL: Q57 C61
    Date: 2015–03–03

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