nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒05‒16
fourteen papers chosen by
Marc Klemp
Brown University

  1. Long-Run Cultural Divergence: Evidence From the Neolithic Revolution By Olsson, Ola; Paik, Christopher
  2. The Facts of Economic Growth By Charles I. Jones
  3. Why Do Cities Matter? Local Growth and Aggregate Growth By Chang-Tai Hsieh; Enrico Moretti
  4. The political economy of churches in Denmark over 700 years By Ella Paldam; Martin Paldam
  5. Was Stalin Necessary for Russia's Economic Development? By Anton Cheremukhin; Anton Golosov; Sergei Guriev; Aleh Tsyvinski
  6. Adult Mortality and Modern Growth By Davide Fiaschi; Tamara Fioroni
  7. Should the Neoclassical Growth Model Include the Saving Flow in the Utility function? By Khelifi, Atef
  8. Growth with Endogenous Direction of Technical Change By LI, Defu; Bental, Benjamin
  9. Education and Fertility: Panel Evidence from sub-Saharan Africa By Carolyn Chisadza; Manoel Bittencourt
  10. Ideas, increasing return to scale, and economic growth: an application for Iran By Farhidi, Faraz; Isfahani, Rahim; Emadzadeh, Mostafa
  11. Does Governance Cause Growth? Evidence from China By Wilson, Ross
  12. “On the bi-directional causal relationship between public debt and economic growth in EMU countries” By Marta Gómez-Puig; Simón Sosvilla-Rivero
  13. Modeling pollution and economic growth: the effect of a lethal threshold By Asuka Oura; Yasukatsu Moridera; Koichi Futagami
  14. Explaining the Relationship between Public Expenditure and Economic Growth in Kenya using Vector Error Correction Model (VECM) By CHRISTINE SIMIYU

  1. By: Olsson, Ola (Department of Economics, School of Business, Economics and Law, Göteborg University); Paik, Christopher (NYU Abu Dhabi)
    Abstract: This paper investigates the long-run influence of the Neolithic Revolution on contemporary cultural norms and institutions as reflected in the imension of collectivism-individualism. We outline an agricultural origins-model of cultural divergence where we claim that the advent of farming in a core region was characterized by collectivist values and eventually triggered the out-migration of individualistic farmers towards more and more peripheral areas. This migration pattern caused the initial cultural divergence, which remained persistent over generations. The key mechanism is demonstrated in an extended Malthusian growth model that explicitly models cultural dynamics and a migration choice for individualistic farmers. Using detailed data on the date of adoption of Neolithic agriculture among Western regions and countries, the empirical findings show that the regions which adopted agriculture early also value obedience more and feel less in control of their lives. They have also had very little experience of democracy during the last century. The findings add to the literature by suggesting the possibility of extremely long lasting norms and beliefs influencing today's socioeconomic outcomes.<p>
    Keywords: Neolithic agriculture; comparative development; Western reversal
    JEL: N50 O43
    Date: 2015–05
  2. By: Charles I. Jones
    Abstract: Why are people in the richest countries of the world so much richer today than 100 years ago? And why are some countries so much richer than others? Questions such as these define the field of economic growth. This paper documents the facts that underlie these questions. How much richer are we today than 100 years ago, and how large are the income gaps between countries? The purpose of the paper is to provide an encyclopedia of the fundamental facts of economic growth upon which our theories are built, gathering them together in one place and updating the facts with the latest available data.
    JEL: E0 O4
    Date: 2015–05
  3. By: Chang-Tai Hsieh; Enrico Moretti
    Abstract: We study how growth of cities determines the growth of nations. Using a spatial equilibrium model and data on 220 US metropolitan areas from 1964 to 2009, we first estimate the contribution of each U.S. city to national GDP growth. We show that the contribution of a city to aggregate growth can differ significantly from what one might naively infer from the growth of the city’s GDP. Despite some of the strongest rate of local growth, New York, San Francisco and San Jose were only responsible for a small fraction of U.S. growth in this period. By contrast, almost half of aggregate US growth was driven by growth of cities in the South. We then provide a normative analysis of potential growth. We show that the dispersion of the conditional average nominal wage across US cities doubled, indicating that worker productivity is increasingly different across cities. We calculate that this increased wage dispersion lowered aggregate U.S. GDP by 13.5%. Most of the loss was likely caused by increased constraints to housing supply in high productivity cities like New York, San Francisco and San Jose. Lowering regulatory constraints in these cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%. We conclude that the aggregate gains in output and welfare from spatial reallocation of labor are likely to be substantial in the U.S., and that a major impediment to a more efficient spatial allocation of labor are housing supply constraints. These constraints limit the number of US workers who have access to the most productive of American cities. In general equilibrium, this lowers income and welfare of all US workers.
    JEL: E24 J01 R0
    Date: 2015–05
  4. By: Ella Paldam (Department of Culture and Society; Aarhus University); Martin Paldam (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: This paper reports new macro time-series for the number and size of churches in Denmark from year 1300 to 2000. Church densities are defined as the series per capita. The densities are interpreted as a proxy for religiosity. It is falling throughout all 700 years, but two events gave an extra fall: 1) The Reformation of Catholicism into Lutheranism in the first half of the 16th century caused a fall of 9%, and 2) modern economic growth after 1820 caused a fourfold fall as predicted by the theory of the religious transition. We suggest that similar data for all European countries would show the same strong reaction of church densities to modern economic growth.
    Keywords: Church stock, religiosity, transition
    JEL: N13 N14 Z12
    Date: 2015–07–05
  5. By: Anton Cheremukhin (Federal Reserve Bank of Dallas); Anton Golosov (Princeton University); Sergei Guriev; Aleh Tsyvinski (Yale University)
    Abstract: This paper studies structural transformation of Soviet Russia in 1928-1940 from an agrarian to an industrial economy through the lens of a two-sector neoclassical growth model. We construct a large dataset that covers Soviet Russia during 1928-1940 and Tsarist Russia during 1885-1913. We use a two-sector growth model to compute sectoral TFPs as well as distortions and wedges in the capital, labor and product markets. We find that most wedges substantially increased in 1928-1935 and then fell in 1936-1940 relative to their 1885-1913 levels, while TFP remained generally below pre-WWI trends. Under the neoclassical growth model, projections of these estimated wedges imply that Stalin's economic policies led to welfare loss of -24 percent of consumption in 1928-1940, but a +16 percent welfare gain after 1941. A representative consumer born at the start of Stalin's policies in 1928 experiences a reduction in welfare of -1 percent of consumption, a number that does not take into account additional costs of political repression during this time period. We provide three additional counterfactuals: comparison with Japan, comparison with the New Economic Policy (NEP), and assuming alternative post-1940 growth scenarios.
    JEL: E6 N23 N24 O4 O41
    Date: 2013–09
  6. By: Davide Fiaschi (Dipartimento di Economia e Management (DEM), Università di Pisa); Tamara Fioroni (Department of Economics (University of Verona))
    Abstract: In this paper we analyze the relationship between (adult) mortality and the long-run development of countries from an empirical and theoretical perspective. A quantitative exploration of the model shows that improvements in adult survival rates alone bring an economy towards a Malthusian regime in the long run, while a transition from a Malthusian to a modern regime requires substantial advances in technological progress. Limited gains in technological progress associated with a strong decline in adult mortality can produce a sort of “false” take-off, i.e. an economy passed from a Malthusian to a pre-modern regime can be pushed back by the increasing demographic pressures.
    Keywords: Unified Growth Theory, Human Capital, Adult mortality, Non-linear Dynamics, Endogenous Fertility, Industrial Revolution
    JEL: O10 O40 I20
    Date: 2015–05
  7. By: Khelifi, Atef
    Abstract: Despite ‘joy of giving models’ have been extensively examined in the literature, the Ramsey growth model has never been explored under the assumption of a direct preference for bequeathing savings that are reinvested. This assumption implies a Utility function depending on both consumption and savings, which may also be motivated as one that captures a direct preference for thriftiness or wealth accumulation arguably involved. The resulting growth model generalizes those accounting for the capitalist spirit as Zou (1994), and shows that the restrictive standard one is perhaps not the actual optimized version of the Solow model. (JEL O41, E21, D91).
    Keywords: Ramsey model; Optimal Growth; Optimal control; Savings decision; bequest; joy-of-giving
    JEL: D5 D91 E1 E2 O41
    Date: 2014–01
  8. By: LI, Defu; Bental, Benjamin
    Abstract: By extending the range of admissible factor accumulation and innovation investment elasticities, this paper expands the Acemoglu (2003) model and obtains several results. First, it identifies conditions for the existence of a steady-state equilibrium and shows that Uzawa’s theorem is obtained as a special case of these conditions. Second, it demonstrates that along a steady-state equilibrium path, technological progress can include both labor-augmenting and capital-augmenting elements. Third, it shows that the direction of technological progress is determined by the relative size of price elasticities of material factors, and is biased towards the factor with the relatively smaller price elasticity. Finally, the paper finds that technical change has two effects on factor income shares. On one hand, factor shares change when the direction of technical progress changes. On the other hand, when the direction of technical change remains unchanged, in general the speed of technical progress also affects factor shares, unless technical progress is Hicks neutral.
    Keywords: steady-state, technical change, Uzawa’s theorem, investment elasticities, price elasiticities, factor income shares
    JEL: E13 O11 O33 Q01
    Date: 2015–01–29
  9. By: Carolyn Chisadza (Department of Economics, University of Pretoria); Manoel Bittencourt (Department of Economics, University of Pretoria)
    Abstract: We study the effects of different levels of education on fertility in 48 sub-Saharan African countries between 1970 and 2010. The results, based on panel data analysis with fi?xed effects and instrumental variables, show how that lower education levels do not have a significant effect on people?s fertility decisions. However, the results from the higher education levels suggest otherwise. They are indicative of a region that is transitioning from the Malthusian epoch to a modern growth regime in which people substitute quantity for quality of children. Lower fertility implies less strain on public expenditure, higher human capital and higher productivity which can lead to sustained economic growth as witnessed in most developed regions today.
    Keywords: education, fertility, sub-Saharan Africa
    JEL: O55 J13 I25
    Date: 2015–05
  10. By: Farhidi, Faraz; Isfahani, Rahim; Emadzadeh, Mostafa
    Abstract: Iran has experienced an increasing rate of economic growth during recent years. We need to explain the causes of this growth if we are to help maintain it. In this study, we try to calibrate and apply a model in the context of new growth models, based on Ideas derived from the Iranian economy. The results show that an increase in education levels and expansion in research activities are the main factors promoting economic growth in Iran during the studied period.
    Keywords: Economic growth, Ideas, Nonrivalry, Technological progress, Population growth
    JEL: O41 Q55 Q56
    Date: 2015–03
  11. By: Wilson, Ross (Department of Economics, Lund University)
    Abstract: This study uses heterogeneous panel Granger causality tests to investigate the causal relationships between quality of governance and economic growth at the provincial level in China during the reform era. I find a significant and positive effect of economic growth on subsequent quality of governance, largely driven by growth in the secondary sector, but no significant effect of quality of governance on economic growth. These findings suggest that improvements in formal governance have not been a key factor in China’s rapid growth, and support the proposition that governance reforms are often a consequence, rather than a cause, of economic growth.
    Keywords: Asia; China; Quality of Governance; Economic Growth
    JEL: O11 O17 O43 O53 R11
    Date: 2015–04–30
  12. By: Marta Gómez-Puig (Faculty of Economics, University of Barcelona); Simón Sosvilla-Rivero (Universidad Complutense de Madrid)
    Abstract: New evidence is presented on the possible existence of bi-directional causal relationships between public debt and economic growth in both central and peripheral countries of the European Economic and Monetary Union. We test for heterogeneity in the bi-directional Granger-causality across both time and space during the period between 1980 and 2013. The results suggest evidence of a “diabolic loop” between low economic growth and high public debt levels in Spain after 2009. For Belgium, Greece, Italy and the Netherlands debt has a negative effect over growth from an endogenously determined breakpoint and above a debt threshold ranging from 56% to 103% depending on the country.
    Keywords: Public debt, economic growth, Granger-causality, euro area, peripheral EMU countries, central EMU countries. JEL classification:C22, F33, H63, O40, O52
    Date: 2015–05
  13. By: Asuka Oura (Graduate School of Economics, Osaka University); Yasukatsu Moridera (Graduate School of Economics, Osaka University); Koichi Futagami (Graduate School of Economics, Osaka University)
    Abstract: The accumulation of pollution negatively impacts human health. Extreme increases in pollution, in particular, may have lethal implications for human beings|and, indeed, all living organisms. This paper thus devises a new model of economic growth that takes into account these lethal effects of accumulated pollution via a pollution threshold to show two key results. First, if an abatement technology is relatively inefficient, there exists a stationary steady state in which consumption and pollution stop growing. Second, if the abatement technology is sufficiently efficient, there exists a path along which pollution decreases at an accelerating rate until finally reaching zero. In this case, consumption grows at a constant rate.
    Keywords: Endogenous growth, Pollution disutility, Pollution abatement
    JEL: O44 Q52
    Date: 2015–04
    Abstract: The rapid growth in public expenditure in Kenya since independence has caused concern among policy makers on its implication on economic growth. The main aim of this study therefore was to explain the relationship between economic growth and public expenditure on Health, Education, Military and Infrastructure in Kenya. The study used a time series data collected between 1963 - 2012. Johansen Cointegration Test and Vector Error Correction Model (VECM) was applied on the time series data to estimate the short-run and long-run relationships between public expenditures and economic growth in Kenya. The results suggests that public expenditure components and economic growth co-move towards a long run equilibrium with a speed of adjustments of approximately 3.6% after short run fluctuations in the equilibrium. Furthermore, the results show no casual relationship between public expenditure and economic growth in Kenya. However, there exist a unidirectional causation between Military and Health expenditures - Military expenditures "Granger Cause" Health expenditures. Hence, a change in Military expenditures cause a change in Health expenditures. These findings suggests that the Government of Kenya switch military expenditures for health expenses in Kenya, but not vice versa.
    Keywords: Vector Error Correction Model (VECM), Granger Causation, Public expenditures, Economic Growth, Kenya.
    JEL: H50 O47 O55

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