nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒04‒19
twelve papers chosen by
Marc Klemp
Brown University

  1. The Nature of Conflict By Cemal Eren Arbatli; Quamrul H. Ashraf; Oded Galor
  2. The Geography of Development: Evaluating Migration Restrictions and Coastal Flooding By Klaus Desmet; Dávid Krisztián Nagy; Esteban Rossi-Hansberg
  3. Participative political institutions and city development 800-1800 By Wahl, Fabian
  4. Robots: Curse or Blessing? A Basic Framework By Jeffrey D. Sachs; Seth G. Benzell; Guillermo LaGarda
  5. The Rise and Fall of U.S. Farm Productivity Growth, 1910–2007 By Alston, Julian M.; Andersen, Matthew A.; Pardey, Philip G.
  6. The contribution of public and private R&D to UK productivity growth By Haskel, J; Goodridge, P; Hughes, A; Wallis, G
  7. Social Capital, Innovation and Economic Growth By Maria Thompson
  8. Taylor Rules, Long-Run Growth and Real Uncertainty By Barbara Annicchiarico; Lorenza Rossi
  9. Inflation gifts restrictions for structural VARs: evidence from the US By Andrea Vaona
  10. Global Competitiveness and Economic Growth: A One-Way or Two-Way Relationship? By Aleksandra Kordalska; Magdalena Olczyk
  11. The role of the level of development, geographical factors, and culture for the efficacy of economic freedom By Malgorzata Zielenkiewicz
  12. From Institutions to Financial Development and Growth: What Are the Links? By Andrés Fernández Martín; Cesar Tamayo

  1. By: Cemal Eren Arbatli; Quamrul H. Ashraf; Oded Galor
    Abstract: This research establishes that the emergence, prevalence, recurrence, and severity of intrastate conflicts in the modern era reflect the long shadow of prehistory. Exploiting variations across national populations, it demonstrates that genetic diversity, as determined predominantly during the exodus of humans from Africa tens of thousands of years ago, has contributed significantly to the frequency, incidence, and onset of both overall and ethnic civil conflict over the last half-century, accounting for a large set of geographical and institutional correlates of conflict, as well as measures of economic development. Furthermore, the analysis establishes the significant contribution of genetic diversity to the intensity of social unrest and to the incidence of intragroup factional conflict. These findings arguably reflect the contribution of genetic diversity to the degree of fractionalization and polarization across ethnic, linguistic, and religious groups in the national population; the adverse influence of genetic diversity on interpersonal trust and cooperation; the contribution of genetic diversity to divergence in preferences for public goods and redistributive policies; and the potential impact of genetic diversity on economic inequality within a society.
    JEL: D74 N30 N40 O11 O43 Z13
    Date: 2015–04
  2. By: Klaus Desmet; Dávid Krisztián Nagy; Esteban Rossi-Hansberg
    Abstract: We study the relationship between geography and growth. To do so, we first develop a dynamic spatial growth theory with realistic geography. We characterize the model and its balanced growth path and propose a methodology to analyze equilibria with different levels of migration frictions. We bring the model to the data for the whole world economy at a 1°×1° geographic resolution. We then use the model to quantify the gains from relaxing migration restrictions as well as to describe the evolution of the distribution of economic activity in the different migration scenarios. Our results indicate that fully liberalizing migration would increase welfare more than three-fold and would significantly affect the evolution of particular regions in the world. We then use the model to study the effect of a spatial shock. We focus on the example of a rise in the sea level and find that coastal flooding can have an important impact on welfare by changing the geographic-dynamic path of the world economy.
    JEL: E2 F11 F18 F22 F43 O1 O4 R23
    Date: 2015–04
  3. By: Wahl, Fabian
    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
  4. By: Jeffrey D. Sachs; Seth G. Benzell; Guillermo LaGarda
    Abstract: Do robots raise or lower economic well-being? On the one hand, they raise output and bring more goods and services into reach. On the other hand, they eliminate jobs, shift investments away from machines that complement labor, lower wages, and immiserize workers who cannot compete. The net effect of these offsetting forces is unclear. This paper seeks to clarify how economic outcomes, positive or negative, depend both on specific parameters of the economy and public policy. We find that a rise in robotic productivity is more likely to lower the welfare of young workers and future generations when the saving rate is low, automatable and non-automatable goods are more substitutable in consumption, and when traditional capital is a more important complement to labor. In some parameterizations the relationship of utility to robotic productivity follows a “noisy U” as large innovations are long-run welfare improving even though small innovations are immiserizing. Policies that redistribute income across generations can ensure that a rise in robotic productivity benefits all generations.
    JEL: E22 E23 E24 E25 H53 J23 O40
    Date: 2015–04
  5. By: Alston, Julian M.; Andersen, Matthew A.; Pardey, Philip G.
    Abstract: Some studies have reported a slowdown in U.S. farm productivity growth, but the prevalent view among economists is to reject or downplay the slowdown hypothesis, implying that the rates of productivity growth experienced over the past half century can be projected forward. We set out to resolve this issue, which matters both for understanding the past and anticipating the future. Using newly compiled multifactor and partial-factor productivity estimates, developed for the purpose, we examine changes in the pattern of U.S. agricultural productivity growth over the past century. We detect sizable and significant slowdowns in the rate of productivity growth. Across the 48 contiguous states for which we have very detailed data for 1949–2007, U.S. multifactor productivity (MFP) growth averaged just 1.18 percent per year during 1990–2007 compared with 2.02 percent per year for the period 1949–1990. MFP in 44 of the 48 states has been growing at a statistically slower rate since 1990. Using a longer-run national series, since 1990 productivity growth has slowed compared with its longer-run growth rate, which averaged 1.52 percent per year for the entire period, 1910–2007. More subtly, the historically rapid rates of MFP growth during the 1960s, 1970s and 1980s can be seen as an aberration relative to the long-run trend. A cubic time-trend model fits the data very well, with an inflection around 1962. We speculate that a wave of technological progress through the middle of the twentieth century—reflecting the progressive adoption of various mechanical innovations, improved crop varieties, synthetic fertilizers and other chemicals, each in a decades long process—contributed to a sustained surge of faster-than-normal productivity growth throughout the third quarter of the century. A particular feature of this process was to move people off farms, a one-time transformation of agriculture that was largely completed by 1980.
    Keywords: Production Economics, Productivity Analysis,
    Date: 2015–01
  6. By: Haskel, J; Goodridge, P; Hughes, A; Wallis, G
    Date: 2015–04–09
  7. By: Maria Thompson (Universidade do Minho, NIPE)
    Abstract: Multidisciplinary innovation is the engine of growth of an increasing number of economies. Innovation output depends increasingly on information sharing and cooperation between creative agents. Sharing and cooperation requires the existence of generalised trust. Social capital consists of trust and trust-based networks. Our main goal is to illustrate theoretically the importance of social capital to the growth of an innovation economy.
    Keywords: Innovation, Social Capital, Economic Growth
    JEL: O00 O31 O41
    Date: 2015
  8. By: Barbara Annicchiarico (Department of Economics, University of Rome Tor Vergata.); Lorenza Rossi (Department of Economics and Management, University of Pavia)
    Abstract: We study the effects of real uncertainty on long-run growth under different Taylor-type rules. We fi…nd a non-negligible relationship between real uncertainty and growth, which depends on the source of real uncertainty as well as the type of the Taylor rule considered. Importantly, when uncertainty is due to investment speci…fic shocks, it is highly detrimental for growth, unless the Central Bank follows a strong inflation targeting rule. Furthermore, we fi…nd that in the presence of real uncertainty, there is a positive correlation between average growth and average inflation under pure inflation targeting regimes and negative otherwise.
    Keywords: Taylor rules, Endogenous Growth, Real Uncertainty.
    JEL: E32 E52 O42
    Date: 2015–04
  9. By: Andrea Vaona (Department of Economics (University of Verona))
    Abstract: We investigate the link between inflation, growth and unemployment nesting a model of fair wages into one of endogenous growth of learning-by-doing. Firms protect real wages against inflation in exchange of worker's effort. In the long-run, unemployment decreases with higher inflation and real growth rates, though less so as inflation and growth increase. We then derive long-run restrictions for structural VARs for US data and we investigate the short-run behavior of inflation, real growth and unemployment. Structural shocks to inflation reduce unemployment and increase growth; to growth reduce unemployment and leave inflation unaffected; to unemployment produce a stagflation.
    Keywords: efficiency wages, money growth, long-run Phillips curve, SVARs
    JEL: E2 E3 E4
    Date: 2015–04
  10. By: Aleksandra Kordalska (Gdansk University of Technology, Faculty of Management and Economics); Magdalena Olczyk (Gdansk University of Technology, Faculty of Management and Economics)
    Abstract: The Global Competitiveness Index is treated as a standard to measure the competitiveness of countries. Leaders look at it to make policy and resource allocation decisions because global competitiveness is expected to be related to economic growth. However, studies which analyze the empirical relationship between these two economic categories are very rare. It is still an open question in the literature whether economic growth can be used to predict future global competitiveness or the other way round. This paper empirically tests the relationship between the GCI and the economic growth rate by using a panel Granger causality analysis based on annual data for 114 countries divided into five groups by income criteria and covering the period 2006-2014. We confirm a strong unidirectional causality among the countries analyzed, i.e. GDP growth causes global competitiveness. Additionally, we find that the GCI is not successful in predicting economic growth for the majority of the 114 counties, with the exception of few large economies such as China, India, the United States and Russia.
    Keywords: Global Competitiveness Index; economic growth; panel Granger causality test
    JEL: O40 O57 C23 F43
    Date: 2015–04
  11. By: Malgorzata Zielenkiewicz (University of Gdansk)
    Abstract: There are many studies focused on the role of economic freedom in creating conditions supportive for economic growth. Most of the recommendations in this area are based on the observations of the highly developed countries. But is it reasonable to generalize these findings to the other countries, independently from their conditions? Contemporary the number of the research conducted for the countries outside the world's forefront rises. Results are varied – some elements of economic freedom seem to be effective unconditionally, some of them bring different results. The aim of the paper is to examine the role of such factors as a stage of economic development, geographical location, and culture in the context of the efficacy of economic freedom. The study was conducted with usage of regression models for panel data and based on the indicators connected with economic freedom and economic growth.
    Keywords: economic freedom, institutions, economic development, geopolitics, culture
    JEL: H10 O10 P50 P51
    Date: 2015–04
  12. By: Andrés Fernández Martín; Cesar Tamayo
    Abstract: This paper presents an integrated overview of the literature linking institutions, financial development and economic growth. From the large body of research on institutional development, the paper first selects those contributions that make it possible to study the role of institutional arrangements in ameliorating/worsening the information frictions and transaction costs that characterize the development of financial markets. The paper then investigates the theoretical mechanisms by which these specific frictions affect economic growth and presents the stock of empirical evidence quantifying the impact of institutions on growth through financial development.
    Keywords: Economic Development & Growth, Financial Markets, Financial Policy, Financial development, Financial frictions, Property rights, Contract enforcement, Transaction costs, Institutions, Economic growth
    Date: 2015–03

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