nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒04‒25
sixteen papers chosen by
Marc Klemp
Brown University

  1. Forbidden Fruits: The Political Economy of Science, Religion, and Growth By Roland Bénabou; Davide Ticchi; Andrea Vindigni
  2. Acts of God? Religiosity and Natural Disasters Across Subnational World Districts By Jeanet Sinding Bentzen
  3. Family Firms and Entrepreneurial Human Capital in the Process of Development By Maria Rosaria Carillo; Vincenzo Lombardo; Alberto Zazzaro
  4. The Great Divergence: A Network Approach By Ines Lindner; Holger Strulik
  5. The Impact of Fractionalization on Cultural Distance Measures By John M Luiz
  6. Structural Change and Transformation of Growth Regime in the Japanese Economy By Hiroshi Nishi
  7. Intensive and Extensive Margins of Fertility, Capital Accumulation, and Economic Welfare By Akira Momota
  8. Economic Development, Novelty Consumption, and Body Weight: Evidence from the East German Transition to Capitalism By Dragone, Davide; Ziebarth, Nicolas R.
  9. The Dynamics of Government Debt and Economic Growth By Swamy, Vighneswara
  10. Economic Implications of Business Dynamics for KE-Associated Economic Growth and Inclusive Development in African Countries By Asongu, Simplice; Amavilah, Voxi; Andrés, Antonio R.
  11. The Growth Effects of R&D Spending in the EU: A Meta-Analysis By Kokko, Ari; Gustavsson Tingvall, Patrik; Videnord, Josefin
  12. Agricultural productivity and pro-poor regional growth: A computable general equilibrium analysis of India By Athula Naranpanawa
  13. The Effect of Female and Male Health on Economic Growth: Cross-Country Evidence within a Production Function Framework By Gazi M. Hassan; Arusha Cooray; Mark J. Holmes
  14. Structural Change and Innovation in Developing Economies: A Way Out of the Middle Income Trap ? By Marco Vivarelli
  15. Structural Change and Total Factor Productivity: Evidence from Germany By Henze, Philipp
  16. Mathematical modeling of physical capital using the spatial Solow model By Gilberto Gonz\'alez-Parra; Benito Chen-Charpentier; Abraham J. Arenas; Miguel Diaz-Rodriguez

  1. By: Roland Bénabou; Davide Ticchi; Andrea Vindigni
    Abstract: We analyze the joint dynamics of religious beliefs, scientific progress and coalitional politics along both religious and economic lines. History offers many examples of the recurring tensions between science and organized religion, but as part of the paper's motivating evidence we also uncover a new fact: in both international and cross-state U.S. data, there is a significant and robust negative relationship between religiosity and patents per capita. The political-economy model we develop has three main features: (i) the recurrent arrival of scientific discoveries that generate productivity gains but sometimes erode religious beliefs; (ii) a government, endogenously in power, that can allow such innovations to spread or instead censor them; (iii) a religious organization or sector that may invest in adapting the doctrine to new knowledge. Three long-term outcomes emerge. First, a "Secularization" or "Western-European" regime with declining religiosity, unimpeded science, a passive Church and high levels of taxes and transfers. Second, a "Theocratic" regime with knowledge stagnation, extreme religiosity with no modernization effort, and high public spending on religious public goods. In-between is a third, "American" regime that generally (not always) combines scientific progress and stable religiosity within a range where religious institutions engage in doctrinal adaptation. It features low overall taxes, together with fiscal advantages or societal laws benefiting religious citizens. Rising income inequality can, however, lead some of the rich to form a successful Religious-Right alliance with the religious poor and start blocking belief-eroding discoveries and ideas.
    JEL: E02 H11 H41 N0 O3 O43 P16 Z1 Z12
    Date: 2015–04
  2. By: Jeanet Sinding Bentzen (University of Copenhagen)
    Abstract: Religiosity affects everything from fertility and health to labor force participation and productivity. But why are some societies more religious than others? To answer this question, I rely on the religious coping theory, which states that many individuals draw on their religious beliefs to understand and deal with adverse life events. Combining subnational district level data on values across the globe from the World Values Survey with spatial data on natural disasters, I ?find that individuals become more religious when their district was hit recently by an earthquake. And further, I fi?nd that this short-term effect co-exists with a long-term impact: Using data on children of immigrants in Europe, I document that high religiosity levels evolve in high earthquake risk areas, and are passed on across generations to individuals no longer living in these areas. The impact is global: earthquakes increase religiosity both within Christianity, Islam, and Hinduism, and within all continents. I document that the results are consistent with the literature on religious coping and inconsistent with alternative theories such as insurance or selection.
    Keywords: Religiosity; Natural disasters; Religious coping
    JEL: Z12 Q54 N30 R10
    Date: 2015–04–14
  3. By: Maria Rosaria Carillo (University of Naples Parthenope); Vincenzo Lombardo (University of Naples Parthenope); Alberto Zazzaro (Polytechnic University of Marche, MoFiR and CSEF)
    Abstract: In this paper we present a new theory accounting for the heterogeneous impact of family firms on economic growth. We develop an overlapping generations model, where agents are heterogeneous in innate talent, and family firms have access to an additional source of managerial capital, family connections, which affects the incentives of the firms' owners to pass on the company within the family and invest in the entrepreneurial human capital of their heirs. Our theory predicts that family firms cluster into heterogeneous groups with different management practices, inducing, at the aggregate level, a misallocation of talent that affects economic growth and the evolution into either a dynamic or a stagnant society, depending on the productivity of family connections in doing business. This heterogeneity in management practices and entrepreneurial human capital explains the different contribution of family firms during industrialization, highlighting the many possible evolutionary patterns for the economy and long-run growth regimes. Consistent with the theory, we provide empirical evidence in favor of the importance of social connectivity among individuals for explaining the difference in management practices between family and non-family firms, and, in turn, the GDP per-capita across countries. JEL Classification: J24, J62, L26, O11, O40
    Keywords: Family firms, family connections, (mis)allocation of talents, technological change, economic growth
    Date: 2015–04–16
  4. By: Ines Lindner (VU University Amsterdam, the Netherlands); Holger Strulik (Georg-August-Universität Göttingen, Germany)
    Abstract: We present a multi-country theory of economic growth in which countries are connected by a network of mutual knowledge exchange. Growth is generated through human capital accumulation and knowledge externalities. The available knowledge in any country depends on its connections to the rest of the world and on the human capital of the countries it is exchanging knowledge with. We show how the diffusion of knowledge through the world explains the evolution of global income inequality. It generates a "Great Divergence", that is increasing world inequality after the take-off of the forerunners of the industrial revolution, followed by a "Great Convergence", that is decreasing world inequality after the take-off of the latecomers of the industrial revolution. Knowledge diffusion through a Small World network produces an extraordinary diversity of individual growth e xperiences of initially identical countries including differentiated take-offs to growth as well as overtaking and falling behind in the course of world development.
    Keywords: networks, knowledge diffusion, economic growth, world income distribution
    JEL: O10 O40 D62 D85 F41
    Date: 2014–03–10
  5. By: John M Luiz
    Abstract: We examine the impact of ethno-linguistic fractionalization (ELF) on existing cultural measures employed in various social sciences. Not only do high levels of fractionalization affect the use of statistical means to account for cultural distance, we show that it is not constant and therefore the dynamics of change need to be addressed. This provides us with an opportunity to bridge the cultural distance and institutional distance literature as institutions impact upon culture and MNEs, and institutional development is, in turn, affected by these. We call for a more realistic assessment of what is being captured in cultural measures and for recognition of the complexity of the notion of identity formation and its dynamics. Countries may have different underlying cultural schisms, including ELF, and its introduction will allow for a richer exploration of distance and diversity in the social sciences.
    Keywords: Cultural distance, entho-linguistic fractionalization, cultural measures
    JEL: Z10 M16 O10
    Date: 2015
  6. By: Hiroshi Nishi
    Abstract: The purpose of this study is to empirically examine the relationship between structural change and economic growth in Japan during the past 40 years. While using the growth in real value added and labour productivity as measurement of economic growth, we consider the structural change in value added as the structural change in output and that in capital and labour as the structural change in inputs. Specifically, we use the Japan Industrial Productivity database 2014 compiled by the Research Institute of Economy, Trade and Industry, and show (1) the pace of structural change in inputs and output, (2) the evolution of sectoral dispersion of economic growth, (3) the changing distribution of sectoral contribution to aggregate economic growth, and (4) empirical evidence of the relationship between structural change and economic growth. Our main conclusion is that the Japanese growth regime has transformed from a heterogeneity decreased regime with overall growth process to a heterogeneity increased one with uneven growth process since the 1990s; the impact that structural change in output had on economic growth was positive, although its magnitude has weakened since then.
    Keywords: wage gap; Growth regime, Sectoral heterogeneity, Structural change, Japanese economy
    JEL: B50 E12 L16 O41
    Date: 2015–04
  7. By: Akira Momota (University of Tsukuba)
    Abstract: This paper investigates the impact of low fertility on long-term capital accumulation and economic welfare. We find that the impact differs according to whether the low fertility arises from a decrease in the intensive or extensive margin of fertility. We show that an increase in the intensive margin of fertility decreases the capital stock and economic welfare. Conversely, we identify a U-shaped relationship between the extensive margin of fertility and the capital stock because of the existence of two opposing effects, such that the decline in fertility may reduce economic welfare. Furthermore, we show that an intragenerational income redistribution policy can eliminate the welfare loss resulting from the incomplete market.
    Keywords: Childlessness, Economic growth, Extensive margin of fertility, Income redistribution, Intensive margin of fertility, Overlapping generations.
    JEL: H23 J13 O41
    Date: 2015–03
  8. By: Dragone, Davide (University of Bologna); Ziebarth, Nicolas R. (Cornell University)
    Abstract: This paper develops a conceptual framework that can explain why economic development goes along with increases in body weight and obesity rates. We first introduce the concept of novelty consumption, which refers to an increase in food availability due to trade or innovation. Then we study how novel food products alter the optimal consumption bundle and welfare, and possibly lead to changes in body weight. We test our model employing the German reunification as a fast motion natural experiment of economic development. Our data elicit detailed information on East Germans' food consumption, body mass, and diet-related health. After the fall of the Wall, East Germans permanently changed their diet by consuming novel western food products. A significant population share permanently gained weight. This is consistent with our theoretical framework where past affects current consumption, and where novel goods determine consumption changes over time with ambiguous effects on diet-related health.
    Keywords: economic development, food consumption, habit formation, learning, novel goods, obesity, nutrition-related health, German reunification
    JEL: D11 D12 I12 I15 L66 O10 O33 Q18 R22
    Date: 2015–04
  9. By: Swamy, Vighneswara
    Abstract: The dynamics of government debt and economic growth, once a subject of interest mostly to very few macroeconomists is suddenly of immense attention for many researchers in the backdrop of Euro zone sovereign debt crisis and Reinhart & Rogoff’s related research. This study investigates the government debt – growth relationship and contributes to literature in the following ways: First, we extend the horizon of analysis to several country groupings and make the study inclusive of economic, political and regional diversities based on a sizeable dataset. Second, we provide evidence for the presence of a causal link going from debt to growth with the use of ‘instrumental variables approach’ unlike the RR approach. Third, we overcome the issues related to data adequacy, coverage of countries, heterogeneity, endogeneity, and non-linearities by conducting a battery of robustness tests. We find that a 10-percentage point increase in the debt-to-GDP ratio is associated with 2 to 23 basis point reduction in average growth. Our results establish the nonlinear relationship between debt and growth.
    Keywords: Government Debt, economic growth, panel data, nonlinearity, country groupings
    JEL: C33 C36 E62 H63 O40 O5
    Date: 2015–04–16
  10. By: Asongu, Simplice; Amavilah, Voxi; Andrés, Antonio R.
    Abstract: This paper develops an empirically-relevant framework (a) to examine whether or not the African business environment hinders or promotes the knowledge economy (KE), (b) to determine how the KE which emerges from such an environment affects economic growth, and (c) how growth in turn relates to the ‘inclusive development’ of 53 African countries during the 1996-2010 time period. The framework provides a modest guide to policymaking about, and further research into, such relationships. We implement the framework by building a three-stage model and rationalizing it as five interrelated hypotheses. To allow greater concentration on the issues that are themselves already complex, our model is very simple, but clear. For example, we make neither an attempt to evaluate causality nor to test for it, even though we suspect the links to be multi-directional – opportunity costs are everywhere. Instead we focus on fundamental relationships between the dynamics of starting business and doing business as expressed in the state of KE, and through it to the inclusive development via the economic growth of those countries. Estimation results indicate that the dynamics of starting and doing business explain strongly a large part of variations in KE. The link between KE and economic growth exists, but it is weak, and we provide plausible reasons for such a result. Despite the weak association between KE and economic growth, KE-influenced growth plays a very important role in inclusive development. In fact, growth of this kind has stronger effects on inclusive development and by implication on poverty reduction, than some of conventional controls in this study such as FDI, foreign aid, and even private investment. There is clearly room for further research to improve the results, but just as clearly practical policy is best served by not neglecting the relationships examined in this paper.
    Keywords: Business Dynamics; Knowledge Economy; Development; Africa
    JEL: L59 O10 O20 O30 O55
    Date: 2014–12–06
  11. By: Kokko, Ari (Copenhagen Business School); Gustavsson Tingvall, Patrik (The Ratio institute and Söderturn university); Videnord, Josefin (The Ratio institute and Uppsala university)
    Abstract: In this paper we conduct a meta-analysis to examine the link between R&D spending and economic growth in the EU and other regions. The results suggest that the growth-enhancing effect of R&D in the EU15 countries does not differ from that in other countries in general, but it is less significant than that for other industrialized countries. A closer inspection of the data reveals that the weak results for the EU15 stem from comparisons with the US – the US has been able to generate a stronger growth response from its R&D spending. Possible explanations for the US advantage include higher private sector investment in R&D and stronger public-private sector linkages than in the EU. Hence, to reduce the “innovation gap” vis-à-vis the US, it may not be enough for the EU to raise the share of R&D expenditures in GDP: continuous improvements in the European innovation system will also be needed, with focus on areas like private sector R&D and public-private sector linkages.
    Keywords: meta-analysis; R&D; European Union; EU15; USA; Economic Growth
    JEL: F43 O51 O52
    Date: 2015–04–14
  12. By: Athula Naranpanawa
    Keywords: Agricultural productivity, Regional economic growth, Pro-poor growth, Computable general equilibrium model, South Asia, India
    JEL: C68 Q16 R11
    Date: 2015–03
  13. By: Gazi M. Hassan (University of Waikato); Arusha Cooray (University of Nottingham, Malaysia); Mark J. Holmes
    Abstract: Adopting a production function based approach, we model the role of health as a regular factor of production on economic growth, and use disaggregate measures of male and female health capital using principal components analysis. Allowing for the dynamics of TFP to be embedded in the production function, we estimate it both in levels and in growth rates to distinguish between long- and short-run effects. We use appropriate panel cointegration methodology to control for endogeneity, cross-sectional dependence and heterogeneity. Our main finding is that while male and female health capital stock has a significantly positive effect on level of output in the long-run, changes in gender disaggregated health capital has a negative or insignificant effect on output growth in the short-run.
    Keywords: health and economic development; economic growth; endogeneity; panel data; TFP convergence; economics of gender
    JEL: J16
    Date: 2015–04–21
  14. By: Marco Vivarelli
    Abstract: This paper is intended to provide an updated discussion on a series of issues that the relevant literature suggests to be crucial in dealing with the challenges a middle income country may encounter in its attempts to further catch-up a higher income status. In particular, the conventional economic wisdom - ranging from the Lewis-Kuznets model to the endogenous growth approach - will be contrasted with the Schumpeterian and evolutionary views pointing to the role of capabilities and knowledge, considered as key inputs to foster economic growth. Then, attention will be turned to structural change and innovation, trying to map - using the taxonomies put forward by the innovation literature - the concrete ways through which a middle income country can engage a technological catching-up, having in mind that developing countries are deeply involved into globalized markets where domestic innovation has to be complemented by the role played by international technological transfer. Among the ways how a middle income country can foster domestic innovation and structural change in terms of sectoral diversification and product differentiation, a recent stream of literature underscores the potentials of local innovative entrepreneurship, that will also be discussed bridging entrepreneurial studies with the development literature. Finally, the possible consequences of catching-up in terms of jobs and skills will be discussed.
    Keywords: catching-up, structural change, globalization, capabilities, innovation, entrepreneurship
    Date: 2015–04–20
  15. By: Henze, Philipp
    Abstract: This paper uses a long time series of German employment data to test the theory of Ngai & Pissarides (2007). The theory suggests that the shift of employment shares from manufacturing to services is due to divergent growth rates of total factor productivity (TFP) in the two sectors. To test the theoretical predictions, I use the "Establishment History Panel" together with sectoral data on total factor productivity. The results confirm the theoretical predictions, i.e. they show a negative relationship between employment growth and TFP growth.
    Keywords: Structural Change,Economic Growth,Total Factor Productivity
    JEL: L16 O14 O40 D24
    Date: 2015–04–16
  16. By: Gilberto Gonz\'alez-Parra; Benito Chen-Charpentier; Abraham J. Arenas; Miguel Diaz-Rodriguez
    Abstract: This research deals with the mathematical modeling of the physical capital diffusion through the borders of the countries. The physical capital is considered an important variable for the economic growth of a country. Here we use an extension of the economic Solow model to describe how the smuggling affects the economic growth of the countries. In this study we rely on a production function that is non-concave instead of the classical Cobb-Douglas production function. In order to model the physical capital diffusion through the borders of the country, we developed a model based on a parabolic partial differential equation that describes the dynamics of physical capital and boundary conditions of Neumann type. Smuggling is present in many borders between countries and may include fuel, machinery and food. This smuggling through the borders is a problematic issue for the country's economies. The smuggling problem usually is related mainly to a non-official exchange rate that is different than the official rate or subsides. Numerical simulations are obtained using an explicit finite difference scheme that shows how the physical capital diffusion through the border of the countries. The study of physical capital is a paramount issue for the economic growth of many countries for the next years. The results show that the dynamics of the physical capital when boundary conditions of Neumann type are different than zero differ from the classical economic behavior observed in the classical spatial Solow model without physical capital flux through the borders of countries. Finally, it can be concluded that avoiding the smuggling through the frontiers is an important factor that affects the economic growth of the countries.
    Date: 2015–04

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