nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒05‒09
nineteen papers chosen by
Marc Klemp
Brown University

  1. The Nature of Conflict By Cemal Eren Arbatli; Quamrul H. Ashraf; Oded Galor
  2. Urbanization without Growth in Historical Perspective By Remi Jedwab; Dietrich Vollrath
  3. Genetic Distance and Cognitive Human Capital: A Cross-National Investigation By Oasis Kodila-Tedika; Simplice Asongu
  4. Does Intelligence Affect Economic Diversification? By Oasis Kodila-Tedika; Simplice Asongu
  5. Growth Econometrics for Agnostics and True Believers By James Rockey; Jonathan Temple
  6. How Did Japan Catch-Up On The West? A Sectoral Analysis Of Anglo-Japanese Productivity Differences, 1885-2000 By Broadberry, Stephen N; Fukao, Kyoji; Zammit, Nick
  7. On the Effect of State fragility on Corruption By Simplice Asongu
  8. Zvi Griliches and the Economics of Technology Diffusion: Linking innovation adoption, lagged investments, and productivity growth By Paul A. David
  9. The Consequences of Increased Population Growth for Climate Change By David Rosnick
  10. The Unilateral Implementation of a Sustainable Growth Path with Directed Technical Change By Inge van den Bijgaart
  11. The Mortality Transition, Malthusian Dynamics, and the Rise of Poor Mega-Cities By Remi Jedwab; Dietrich Vollrath
  12. A Theoretical Basis for Green Growth By Dinda, Soumyananda
  13. Japan And The Great Divergence, 725-1874 By Bassino, Jean-Pascal; Broadberry, Stephen N; Fukao, Kyoji; Gupta, Bishnupriya; Takashima, Masanori
  14. GDP per capita in advanced countries over the 20th century By A. Bergeaud; G. Cette; R. Lecat
  15. The growth effects of R&D spending in the EU: A meta-analysis By Kokko, Ari; Tingvall, Patrik Gustavsson; Videnord, Josefin
  16. Financial intermediation and economic growth By Leyla Yusifzada; Aytan Mammadova
  17. Are there Significant Externality Effects of Remittances in Asian Economic Growth? By Gazi M. Hassan; Shamim Shakur
  18. Government Debt and Economic Growth – Decomposing the Cause and Effect Relationship By Swamy, Vighneswara
  19. The Optimal Inflation Rate under Schumpeterian Growth By Koki Oikawa; Kozo Ueda

  1. By: Cemal Eren Arbatli (National Research University Higher School of Economics); Quamrul H. Ashraf (Williams College); Oded Galor (Brown University)
    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.
    Keywords: Civil conflict, genetic diversity, fractionalization, polarization, interpersonal trust, preferences for public goods, economic inequality
    JEL: D74 N30 N40 O11 O43 Z13
    Date: 2015–04
  2. By: Remi Jedwab (Department of Economics/Institute for International Economic Policy, George Washington University); Dietrich Vollrath
    Abstract: The world is becoming more and more urbanized at every income level, and there has been a dramatic increase in the number of mega-cities in the developing world. This has led scholars to believe that development and urbanization are not always correlated, either across space or over time. In this paper, we use historical data at both the country level and city level over the five centuries between 1500-2010 to revisit the topic of “urbanization without growth†(Fay & Opal, 2000). In particular, we first establish that, although urbanization and income remain highly correlated within any given year, urbanization is 25-30 percentage points higher in 2010 than in 1500 at every level of income per capita. Second, while historically this shift in urbanization rates was more noticeable at the upper tail of the income distribution, i.e. for richer countries, it is now particularly visible at the lower tail, i.e. for poorer countries. Third, these patterns suggest that different factors may have explained the shift in different periods of time. We use the discussion of these factors as an opportunity to provide a survey of the literature and summarize our knowledge of what drives the urbanization process over time.
    Keywords: Urbanization without Growth, Economic Development, Megacities, Urban Poverty, Urbanization
    JEL: N9 R1 O1
  3. By: Oasis Kodila-Tedika (Université de Kinshasa Département d’Eco); Simplice Asongu (Yaoundé/Cameroun)
    Abstract: This paper explores the determinants of intelligence by focusing on the role played by barriers to the diffusion of competence and human capital. The results based on cross-sectional data from 167 countries consisting of 1996-2009 averages suggest that, genetic distance to global frontiers has a negative relationship with human capital. Countries that are genetically far from leading nations tend to have lower levels of human capital with the negative correlation from the USA frontier higher relative to the UK frontier. The sign is consistent with the relationship of genetic diversity and robust to the control of macroeconomic, geographical, institutional and influential variables. Policy implications are discussed.
    Keywords: Intelligence, Human Capital, Genetic distance
    JEL: G15 O50 O16 F15 N7
    Date: 2015–04
  4. By: Oasis Kodila-Tedika (Université de Kinshasa Département d’Eco); Simplice Asongu (Yaoundé/Cameroun)
    Abstract: This paper extends the growing literature on knowledge economy by investigating the effect of intelligence on economic diversification. Using a battery of estimation techniques that are robust to endogeneity, we find that human capital has positive correlations with export diversification, manufactured added value and export manufactures. This empirical evidence is based on a world sample for the year 2010. The findings have significant implications for the fight against the Dutch disease. In essence, investing in human capital could bring economic diversity and therefore dampen negative external shocks related to resource-dependence. Other knowledge-economy implications are discussed.
    Keywords: Intelligence; Economic Diversification
    JEL: O1 O4 O55 I32 I2
    Date: 2014–08
  5. By: James Rockey; Jonathan Temple
    Abstract: The issue of model uncertainty is central to the empirical study of economic growth. Many recent papers use Bayesian Model Averaging to address model uncertainty, but Ciccone and Jarociński (2010) have questioned the approach on theoretical and empirical grounds. They argue that a standard ‘agnostic’ approach is too sensitive to small changes in the dependent variable, such as those associated with different vintages of the Penn World Table (PWT). This paper revisits their theoretical arguments and empirical illustration, drawing on more recent vintages of the PWT, and introducing an approach that limits the degree of agnosticism.
    Keywords: Bayesian Model Averaging, Growth Regressions, Growth Econometrics.
    JEL: C51 O40 O47
    Date: 2015–05–05
  6. By: Broadberry, Stephen N; Fukao, Kyoji; Zammit, Nick
    Abstract: Although Japanese economic growth after the Meiji Restoration is often characterised as a gradual process of trend acceleration, comparison with the United States suggests that catching-up only really started after 1950, due to the unusually dynamic performance of the US economy before 1950. A comparison with the United Kingdom, still the world productivity leader in 1868, reveals an earlier period of Japanese catching up between the 1890s and the 1920s, with a pause between the 1920s and the 1940s. Furthermore, this earlier process of catching up was driven by the dynamic productivity performance of Japanese manufacturing, which is also obscured by a comparison with the United States. Japan overtook the UK as a major exporter of manufactured goods not simply by catching-up in labour productivity terms, but by holding the growth of real wages below the growth of labour productivity so as to enjoy a unit labour cost advantage. Accounting for levels differences in labour productivity between Japan and the United Kingdom reveals an important role for capital in the catching-up process, casting doubt on the characterisation of Japan as following a distinctive Asian path of labour intensive industrialisation.
    Keywords: international comparison; labour productivity; sectoral disaggregation
    JEL: N10 N30 O47 O57
    Date: 2015–05
  7. By: Simplice Asongu (Yaoundé/Cameroun)
    Abstract: The Kodila-Tedika & Bolito-Losembe (2014, ADR) finding on no evidence of causality flowing from State fragility to classical corruption or extreme corruption could have an important influence on academic and policy debates. Using updated data (1996-2010) from 53 African countries, we provide evidence of a positive (negative) nexus between political stability/no violence and corruption-control (corruption). As a policy implication, the finding of the underlying paper maybe more expositional than factual and should be treated with caution.
    Keywords: Fragility; Corruption; Conflicts; Africa
    JEL: F52 K42 O17 O55 P16
    Date: 2014–04
  8. By: Paul A. David (Stanford University)
    Abstract: The scientific legacy of Zvi Griliches' contribution to the economic analysis of the diffusion of technological innovations is the subject of this paper. It begins with an examination of the relationship between Griliches' pioneering empirical work on the introduction and adoption of hybrid corn and the subsequent development of theoretical models and econometric research on the microeconomic determinants of diffusion. Next, it formalizes the way that the dynamics of diffusion observed at the aggregate level is shaped by structural conditions at the micro-level – on both the supply and the demand sides of the market for products embodying technological innovations, both of which were addressed by Griliches (1957). It then points out the reflections of those processes in lagged behavior of aggregate investment in durable capital-embodied innovations – often regarded as an independent subject of Griliches' analytical and econometric research. The latter connection, and its link with productivity changes stemming from embodied technical change, are made explicit by the model of micro-to-macro relationships affecting the total factor productivity (TFP) growth rate that is presented in the third major section of the paper (and the Appendix). The three foregoing dynamic phenomena - diffusion, durable investment lags, and TFP growth – were the topics of Griliches' three most widely journal articles, respectively. The connections among them have not been generally noticed by economists, and, indeed they remained implicit his writings until late in his career, when he emphasized the diffusion-productivity nexus as a key proximate determinant of the pace of economic growth – a perception whose importance remains insufficiently appreciated in current policy discussions that focus attention on "innovation" as the driver of intensive growth. Having directed attention to the microeconomics of technology adoption underlying the 'transitions' during which the diffusion of major innovations generate surges in innovation-embodying capital formation, and to the consequent waves in the TFP growth rate at the industry and sectoral levels, should be seen as prominent among the important and enduring contributions that Zvi Griliches made to modern economics.
    Keywords: Ntechnology adoption, innovations, diffusion, investment lags, learning-by-doing, heterogeneous adopters, contagion model, threshold model, micro-macro models, labor productivity and TFP growth-surges.
    JEL: D22 D24 O33 O4
    Date: 2015–04
  9. By: David Rosnick
    Abstract: This paper examines the impact of population growth on global climate change. The author employs the Global Change Assessment Model (GCAM) to estimate the effects of population growth on the change global average temperature by 2100. Observing that a larger population supports a larger economy, which translates in close proportion into additional releases of carbon dioxide (CO2), the paper notes that global temperature should in any year be nearly linear in relation to the rate of growth when the rate of population growth is constant. The paper finds that that an additional 1 percentage point of population growth through the end of the century would coincide with about an additional 2 degrees Fahrenheit in average global temperatures. Over time, the temperature change is greater and becomes increasingly sensitive to population growth.
    Keywords: environment, climate change, population, population growth, Global Change Assessment Mode
    JEL: Q Q5 Q54
    Date: 2014–12
  10. By: Inge van den Bijgaart (Tilburg University (The Netherlands))
    Abstract: We determine the core characteristics of a climate coalition’s optimal policies in a dynamic two country directed technical change framework. Unilateral policies alter the structure of production and thereby innovation incentives across countries. Whenever feasible, optimal policies implement sustainable growth by directing global innovation to the nonpolluting sector. If nonparticipants drive global innovation, this requires policies relocating clean production to nonparticipants. A calibration exercise suggests that the US or EU alone are too small to implement sustainable growth. A coalition of Annex I countries that signed the Kyoto protocol can implement sustainable growth, yet required tax rates are very high.
    Keywords: Sustainable Growth, Technical Change, Innovation
    JEL: Q5 Q56
    Date: 2015–02
  11. By: Remi Jedwab (Department of Economics/Institute for International Economic Policy, George Washington University); Dietrich Vollrath
    Abstract: The largest cities in the world today lie mainly in relatively poor countries, which is a departure from historical experience, when the largest cities were typically found in the richest places. Using new data on the demographic history of the 100 largest mega-cities of today, we establish several new stylized facts distinguishing poor mega-cities from historically rich mega-cities. To account for these facts we develop a model that combines Malthusian models of endogenous population growth with urban models of agglomeration and congestion, and it shows that the absolute growth of the urban population determines whether a city becomes a poor or rich mega-city. We posit that poor mega-cities arose in part because the post-war mortality transition raised their absolute growth above a crucial threshold. Poor mega-cities continue to grow in size but not in living standards because their poverty keeps population growth high. By expanding prior to the mortality transition, historical mega-cities experienced smaller absolute growth that allowed them to sustain wage growth and kept population growth relatively low.
    Keywords: Urban Malthusianism, Demographic Regime, Megacities, Congestion, Growth
    JEL: O11 O14 O18 L16 N10 N90 R10
    Date: 2015–01
  12. By: Dinda, Soumyananda
    Abstract: This paper suggests a theoretical model of inclusive green growth. Paper analyses development mechanism through which natural resource capital regenerates (or at least non-degrade) and contributes to economic growth. Climate change is a threat to save natural resources which is a crucial productive capital in the economy and also challenges economic development in the 21st century. New development strategy is the inclusive green growth that leads towards sustainable development. This paper suggests policy inputs regarding regeneration of natural resource and its preservation in term of water shed development, flood control or development of ecosystem services through creation of jobs in the channel of productive consumption. Policy makers should focus on employability, regeneration and preservation of natural resource capital for sustaining livelihoods in the economy.
    Keywords: Green Growth, Climate Change, Social Capital, Productive Consumption, Reciprocity, Flood Control, Watershed Development, Natural Resource Capital, Human Capital, Inclusive Growth, Sustainable Development.
    JEL: I3 J3 Q15 Q18 Z18
    Date: 2013–04–23
  13. By: Bassino, Jean-Pascal; Broadberry, Stephen N; Fukao, Kyoji; Gupta, Bishnupriya; Takashima, Masanori
    Abstract: Japanese GDP per capita grew at an annual rate of 0.04 per cent between 725 and 1874, but the growth was episodic, with the increase in per capita income concentrated in three periods, 1150-1280, 1450-1600 and after 1730, interspersed with periods of stable per capita income. There is a similarity here with the growth pattern of Britain. The first countries to achieve modern economic growth at opposite ends of Eurasia thus shared the experience of an early end to growth reversals. However, Japan started at a lower level than Britain and grew more slowly until the Meiji Restoration.
    Keywords: Britain; GDP per capita; Great Divergence; growth reversals; Japan
    JEL: N10 N30 N35 O10 O57
    Date: 2015–05
  14. By: A. Bergeaud; G. Cette; R. Lecat
    Abstract: This study presents a GDP per capita level and growth comparison across 17 main advanced countries and over the 1890-2013 long period. It proposes also a comparison of the level and growth of the main components of GDP per capita through an accounting breakdown and runs Philips-Sul (2007) convergence tests over GDP per capita and its main components. These components are total factor productivity, capital intensity (capital stock per hours worked), working time and employment rate. Over the whole period, standards of living as measured by GDP per capita experienced a very marked increase in advanced countries, especially because of the surge in Total Factor Productivity (TFP) and in capital intensity. The main results of the study are the following: i) All countries experienced at least one big wave of GDP per capita growth during the 20th Century, but of different sizes and in a staggered manner; ii) Almost all countries have suffered from a significant decline in GDP per capita growth during the last decades of the period; iii) The GDP per capita leadership changed among large countries over the period, from the UK until WWI to the US since WWII; iv) There is an overall convergence process among advanced countries, mainly after WWII, relying mostly on capital intensity convergence and then on TFP convergence, while evolutions in hours worked and even more employment rates are more disparate; v) But this convergence process is not continuous and was particularly scattered since 1990, as the convergence of the EA, the UK and Japan to the US GDP per capita level stopped at a large distance, with reforming or structurally flexible countries accelerating thanks to the Information and Communication Technology shock, while some countries such as Japan lingered in crisis; vi) Employment rates and hours worked did not contribute to the overall convergence process, with club convergence very often appearing for these variables among European countries on one side and Anglo-Saxon countries on the other. Dynamics were especially divergent between these two groups since 1974, as opposite labor policies were implemented.
    Keywords: GDP per capita, Productivity, convergence, technological change, global history.
    JEL: E20 N10 O47
    Date: 2015
  15. By: Kokko, Ari; Tingvall, Patrik Gustavsson; Videnord, Josefin
    Abstract: In this paper the authors 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
  16. By: Leyla Yusifzada; Aytan Mammadova
    Abstract: Financial depth does not fully reflect how well the financial intermediaries serve to economic agents in stimulating economic growth. Additional aspects of financial system such as access, efficiency and stability should be taken into account in order to shed light into the relationship between finance and economic growth. In our paper we capture the four aspects of finance – depth, access, efficiency and stability – to investigate the impact of financial development and economic growth. Our results suggest that the impact of four parameters of financial development differs depending on the level of financial development and has an inverted S-shape function.
    Keywords: Financial intermediaries, financial development, economic growth, financial depth, access to finance, efficiency, financial stability
    JEL: E44 O16
    Date: 2015–12–01
  17. By: Gazi M. Hassan (University of Waikato); Shamim Shakur (Massey University)
    Abstract: This paper estimates the externality effects of remittances for selected Asian countries. According to Romer (1986), externality generated by the education sector can raise nationwide productivity. Because a portion of remittances income is invested on education, remittances stock can also generate such externalities. Using a Romer-type production function and panel cointegration, we find that the externality effects of remittances are small but highly significant.
    Keywords: remittances; externality effects; endogenous growth; panel cointegration; group-mean panel dynamic OLS
    JEL: O10 F22
    Date: 2015–04–24
  18. By: Swamy, Vighneswara
    Abstract: The rising government debt levels in the aftermath of global financial crisis and the ongoing euro zone debt crisis have necessitated the revival of the academic and policy debate on the impact of growing debt levels on growth. This study provides a data–rich analysis of the dynamics of government debt and economic growth for a longer period (1960–2009). It spans across different debt regimes and involves a worldwide sample of countries that is more representative than that of studies confined to advanced countries. This study observes a negative relationship between government debt and growth. The point estimates of the range of econometric specifications suggest a 10-percentage point increase in the debt-to-GDP ratio is associated with 23 basis point reduction in average growth. Our results establish the nonlinear relationship between debt and growth. Further, by employing panel vector auto regressions (PVAR) approach, this study decomposes the cause and effect relationship between debt and growth and offers an answer to the question – Does high debt lead to low growth or low growth leads to high debt? The results derived from the impulse–response functions and variance decomposition show the evidence of long-term effect of debt on economic growth. The results indicate that the effect is not uniform for all countries, but depends mostly on the debt regimes and other important macroeconomic variables like; inflation, trade openness, general government final consumption expenditure and foreign direct investment.
    Keywords: Government Debt, economic growth, panel data, nonlinearity, country groupings
    JEL: C33 C36 E62 H63 O4 O40 O50
    Date: 2015–04
  19. By: Koki Oikawa; Kozo Ueda
    Abstract: In this study, we analyze the relationship between inflation and economic growth. To this end, we construct a model of endogenous growth with creative destruction, incorporating sticky prices due to menu costs. Inflation and deflation reduce the reward for innovation via menu cost payments and, thus, lower the frequency of creative destruction. Central banks can maximize the rate of economic growth by setting their target inflation rate at the negative of a fundamental growth rate that would be realized without price stickiness. The optimal inflation rate, however, may differ from the growth-maximizing inflation rate because of overinvestment in R&D and indeterminacy. Both mechanisms indicate a higher optimal inflation rate than the negative of a fundamental growth rate. Our calibrated model shows that the optimal inflation rate is close to the growth-maximizing inflation rate and that a deviation from the optimal level has sizable impacts on economic growth.
    Keywords: creative destruction, menu cost, new Keynesian, monetary policy
    JEL: E31 E58 O33 O41
    Date: 2015–05

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