nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒06‒13
nineteen papers chosen by
Marc Klemp
Brown University

  1. Ancestry, Language and Culture By Spolaore, Enrico; Wacziarg, Romain
  2. Innovation and Top Income Inequality By Philippe Aghion; Ufuk Akcigit; Antonin Bergeaud; Richard Blundell; David Hémous
  3. Linkages and Economic Development By Dominick Bartelme; Yuriy Gorodnichenko
  4. Ethnic inclusiveness of the central state government and economic growth in sub-Saharan Africa By Frédéric Gaspart; Pierre Pecher
  5. Intergenerational Politics, Government Debt, and Economic Growth By Tetsuo Ono
  6. Knowledge Diffusion and Industry Growth: The Case of Japanfs Early Cotton Spinning Industry By Serguey Braguinsky
  7. The wise use of leisure time. A three-sector endogenous growth model with leisure services By G. Candela; M. Castellani; R. Dieci
  8. Union, efficiency of labour and endogenous growth By Bhattacharyya, Chandril; Gupta, Manash Ranjan
  9. The evolutionary advantage of cooperation By Ole Peters; Alexander Adamou
  10. Trade Liberalisation and Economic Growth in Developing Countries: Does Stage of Development Matter? By Ramesh Paudel
  11. Take-off, Persistence, and Sustainability : The Demographic Factor of Chinese Growth By Cai Fang, Lu Yang
  12. Directed Technical Change and Capital Deepening: A Reconsideration of Kaldor’s Technical Progress Function By Schlicht, Ekkehart
  13. Education and Growth with Learning by Doing By Marconi, Gabriele; de Grip, Andries
  14. Issues and barriers in economic development (Last stage of economic development) By Mashkoor, Aasim; Ahmed, Ovais
  15. On the relationship between energy consumption, productivity and economic growth: Evidence from Algeria, Ghana, Nigeria and South Africa By Ackah, Ishmael
  16. The Effect of Board Directors from Countries with Different Genetic Diversity Levels on Corporate Performance By Delis, Manthos; Gaganis, Chrysovalantis; Hasan, Iftekhar; Pasiouras, Fotios
  17. Transboundary Capital and Pollution Flows and the Emergence of Regional Inequalities By Simon Levin; Anastasios Xepapadeas
  18. Why does financial sector growth crowd out real economic growth? By Cecchetti, Stephen G; Kharroubi, Enisse
  19. Financial Liberalisation and Economic Growth in the SADC By Pierre Le Roux and Clement Moyo

  1. By: Spolaore, Enrico; Wacziarg, Romain
    Abstract: We explore the interrelationships between various measures of cultural distance. We …first discuss measures of genetic distance, used in the recent economics literature to capture the degree of relatedness between countries. We next describe several classes of measures of linguistic, religious, and cultural distances. We introduce new measures of cultural distance based on differences in average answers to questions from the World Values Survey. Using a simple theoretical model we hypothesize that ancestral distance, measured by genetic distance, is positively correlated with linguistic, religious, and cultural distance. An empirical exploration of these correlations shows this to be the case. This empirical evidence is consistent with the view that genetic distance is a summary statistic for a wide array of cultural traits transmitted intergenerationally.
    Keywords: Ancestry; Barriers; Cladistics; Cultural distance; Genetic distance; Linguistic distance; Religious distance; World Values Survey
    JEL: F14 O11 O33 O47 O57 Z1
    Date: 2015–06
  2. By: Philippe Aghion; Ufuk Akcigit; Antonin Bergeaud; Richard Blundell; David Hémous
    Abstract: In this paper we use cross-state panel data to show a positive and significant correlation between various measures of innovativeness and top income inequality in the United States over the past decades. Two distinct instrumentation strategies suggest that this correlation (partly) reflects a causality from innovativeness to top income inequality, and the effect is significant: for example, when measured by the number of patent per capita, innovativeness accounts on average across US states for around 17% of the total increase in the top 1% income share between 1975 and 2010. Yet, innovation does not appear to increase other measures of inequality which do not focus on top incomes. Next, we show that the positive effects of innovation on the top 1% income share are dampened in states with higher lobbying intensity. Finally, from cross-section regressions performed at the commuting zone (CZ) level, we find that: (i) innovativeness is positively correlated with upward social mobility; (ii) the positive correlation between innovativeness and social mobility, is driven mainly by entrant innovators and less so by incumbent innovators, and it is dampened in states with higher lobbying intensity. Overall, our findings vindicate the Schumpeterian view whereby the rise in top income shares is partly related to innovation-led growth, where innovation itself fosters social mobility at the top through creative destruction.
    JEL: D63 J14 J15 O30 O31 O33 O34 O40 O43 O47
    Date: 2015–06
  3. By: Dominick Bartelme; Yuriy Gorodnichenko
    Abstract: Specialization is a powerful source of productivity gains, but how production networks at the industry level are related to aggregate productivity in the data is an open question. We construct a database of input-output tables covering a broad spectrum of countries and times, develop a theoretical framework to derive an econometric specification, and document a strong and robust relationship between the strength of industry linkages and aggregate productivity. We then calibrate a multisector neoclassical model and use alternative identification assumptions to extract an industry-level measure of distortions in intermediate input choices. We compute the aggregate losses from these distortions for each country in our sample and find that they are quantitatively consistent with the relationship between industry linkages and aggregate productivity in the data. Our estimates imply that the TFP gains from eliminating these distortions are modest but significant, averaging roughly 10% for middle and low income countries.
    JEL: C67 O11 O47
    Date: 2015–06
  4. By: Frédéric Gaspart (UNIVERSITE CATHOLIQUE DE LOUVAIN, Earth and Life Institute); Pierre Pecher (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: We estimate the effect of the share of ethnic groups included in the central government on economic growth, distinguishing between democracies and autocracies in a panel of 41 sub-Saharan African countries over the period 1950-2000. We exploit evidence from the Ethnic Power Relations database that categorizes the politically relevant ethnic groups in terms of access to state power. We are taking advantage of the within-country variation and using Fixed-Effects, Difference-GMM and System-GMM estimations. Our dynamic panel data and error-correction growth models display a robust positive effect of the proportion of included groups in democracies. This effect is offset in autocracies and the difference is often significantly negative. This finding withstands the introduction of various controls and specification checks. We provide a theoretical rationalization of this observed phenomenon in the form of a mechanism involving the opposition of forces linked to efficiency gains, coordination failures and inclusiveness.
    JEL: N17 O11 O43
    Date: 2015–05–21
  5. By: Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This study presents a two-period overlapping-generations model featuring in- tergenerational conflict over fiscal policy. In particular, we characterize a Markov- perfect political equilibrium of the voting game between generations and show the following three main results. First, population aging incentivizes the government to invest more in capital for future public spending, positively affecting economic growth. Second, when the government finances its spending by issuing bonds, the introduction of the balanced budget rule results in a higher public spending-to-GDP ratio and a higher growth rate. Third, to obtain a normative implication of the po- litical equilibrium, we compare it with an allocation chosen by a benevolent planner who takes care of all future generations. The planner's allocation might feature less growth and more borrowing than the political equilibrium if the planner attaches low weights to future generations.
    Keywords: Economic Growth; Government Debt; Overlapping Generations; Pop- ulation Aging; Voting
    JEL: D72 D91 H63
    Date: 2014–06
  6. By: Serguey Braguinsky
    Abstract: The diffusion of technological knowledge is key to industry growth. But not all knowledge is created equal. I use a nanoeconomic approach to examine knowledge-diffusion based growth in the Meiji-era Japanese cotton spinning industry, which enjoyed remarkable success after a decade of initial failure. By tracing sources of technological knowledge to individual engineers, I find that successful technology diffusion required the right kind of human capital embodying and transmitting knowledge, and a competitive environment that rewarded talent while weeding out incompetence.
    Date: 2015–06
  7. By: G. Candela; M. Castellani; R. Dieci
    Abstract: In this paper, starting from the two-sector Uzawa-Lucas model, we study a three-sector endogenous growth model with leisure services. By extending the endogenous growth model with leisure developed by Ladrón-de Guevara et al. [1999], our model generalizes the standard time allocation problem, in that it explicitly accounts for the way total time is allocated between work, education, purely free time and time spent on leisure services, where the latter represents therefore an additional time-consuming activity. Accordingly, service consumption is tied to a production sector for leisure services in our model. We fully characterize Balanced Growth Path (BGP) equilibria in terms of time allocation and growth, and show that multiple BGPs are possible. Since service production plays an important role in economic development, we carry out a comparative analysis of the dynamic performance of different economic systems - Post-Industrial Economy vs. Service Economy - along a BGP.
    JEL: O14 O41 D90
    Date: 2015–06
  8. By: Bhattacharyya, Chandril; Gupta, Manash Ranjan
    Abstract: This paper develops an endogenous growth model with human capital formation and ‘Efficiency Wage Hypothesis’ to investigate the growth effect of unionisation and to analyse properties of optimum income tax rate in the presence of an unionised labour market and with taxation only on labour income. ‘Efficient Bargaining’ model as well as ‘Right to Manage’ model is used to solve the negotiation problem between the labour union and the employer’s association. In both type modelling framework, the growth effect of unionisation is independent of its employment effect; and it depends on its net effect on worker’s efficiency. The growth rate maximizing tax rate on labour income is different from the corresponding welfare maximizing tax rate; and the nature of the growth effect of unionisation is different from its welfare effect.
    Keywords: Labour union; Efficiency wage hypothesis; Human capital Formation; income tax; Endogenous growth
    JEL: H21 H52 J24 J31 J51 O41
    Date: 2015–05–15
  9. By: Ole Peters; Alexander Adamou
    Abstract: The present study asks how cooperation and consequently structure can emerge in many different evolutionary contexts. Cooperation, here, is a persistent behavioural pattern of individual entities pooling and sharing resources. Examples are: individual cells forming multicellular systems whose various parts pool and share nutrients; pack animals pooling and sharing prey; families firms, or modern nation states pooling and sharing financial resources. In these examples, each atomistic decision, at a point in time, of the better-off entity to cooperate poses a puzzle: the better-off entity will book an immediate net loss -- why should it cooperate? For each example, specific explanations have been put forward. Here we point out a very general mechanism -- a sufficient null model -- whereby cooperation can evolve. The mechanism is based the following insight: natural growth processes tend to be multiplicative. In multiplicative growth, ergodicity is broken in such a way that fluctuations have a net-negative effect on the time-average growth rate, although they have no effect on the growth rate of the ensemble average. Pooling and sharing resources reduces fluctuations, which leaves ensemble averages unchanged but -- contrary to common perception -- increases the time-average growth rate for each cooperator.
    Date: 2015–06
  10. By: Ramesh Paudel (Crawford School of Public Policy, The Australian National University)
    Abstract: This paper surveys the available literature on liberalisation and growth, updates the widely used Sachs and Warner (1995) index of trade liberalisation for 193 countries up to 2010, and then investigates the impacts of trade liberalisation in economic growth using a dynamic growth model for a large set of panel data covering the period of 1985-2010. The results show that the impact of trade liberalisation on economic growth differs across countries depending on the stage of economic development. Lower-middle income countries, on average, benefit at least 3% more compared to other developing countries from the trade liberalisation. This finding makes a strong case for taking into account the stage of economic development in making policy recommendations for trade policy reforms, departing from the standard ÒWashington ConsensusÓ approach.
    Keywords: liberalisation; economic reform; economic development; economic growth
    JEL: F14 P26 N10 O40
    Date: 2014–12
  11. By: Cai Fang, Lu Yang
    Abstract: With the reduction of the working-age population and the increase of the population dependency ratio as the main characteristics of the demographic dividend having disappeared, China’s potential growth rate decreases. And our results suggest that demographic dividend contributed to nearly one forth of the economic growth in China in the past three decades, while TFP growth explains another one third with the remainder mainly due to capital accumulation, explaining nearly half. China’s potential growth rate will slow down—from nearly 10 per cent in the past 30 years to 7.5 per cent on average during 2011-2015—due to the diminished demographic dividend, but reform measures are conductive to clearing the institutional barriers to the supply of factors and productivity, thereby slowing the declining trend of potential growth rate. The aggregate reform dividend (e.g., relax family planning policy, postpone the retirement age, improvement of education and training, tax cut, and improvement of TFP) could reach to 1-2 percentage points on average during 2016-2050.
    Keywords: potential growth rate, Demographic dividend, reform dividend, total factor productivity
    JEL: O47 J21 C53
    Date: 2015–04
  12. By: Schlicht, Ekkehart
    Abstract: This note proposes a growth model that is derived from the standard Solow growth model by replacing the neoclassical production function with Kaldor’s technical progress function while maintaining a marginalist theory of factor prices in the spirit suggested by von Weizsäcker (1966, 1966b). The hybrid model so obtained accounts for balanced growth in a way that appears less arbitrary than the Solow model, especially because it directly accounts for Harrod neutral technical change, without any need for further assumptions.
    Keywords: directed technical change; directed technological change; bias in innovation; technical progress function; neoclassical production function; Harrod neutrality; Hicks neutrality; Cambridge theory of distribution; marginal productivity theory; Kaldor; Kennedy; von Weizsäcker; Solow model
    JEL: O30 O40 E12 E13 E25 B59 B31
    Date: 2015–06–19
  13. By: Marconi, Gabriele (OECD); de Grip, Andries (ROA, Maastricht University)
    Abstract: We develop a general equilibrium overlapping generations model which is based on the view that education makes workers more productive by increasing their ability to learn from work experience, rather than providing skills that directly increase productivity. One important implication of the model is that the enrolment rate to education has a negative effect on the GDP in the medium term and a positive effect in the long term. This could be an explanation for the weak empirical relationship between education and economic growth that has been found in the empirical macroeconomic literature. Conversely, for a given enrolment rate, the quality of education, as measured by workers' ability to learn, has a positive effect on the GDP both in the medium and in the long term.
    Keywords: education, learning-by-doing, productivity, economic growth, overlapping generations model
    JEL: I25 J24 O11 O41
    Date: 2015–05
  14. By: Mashkoor, Aasim; Ahmed, Ovais
    Abstract: The research study is to determine the barriers within overall economic development which diversify the issues and problems in growth. Pakistan is a well-sustainable economy in current world. This research investigated the factor affecting issues which are unrealistic. The most common issues are financial issues, negative human resource policies, micro inflation and corruption in public and private projects.
    Keywords: Economic Development, Barriers of Economic Performance
    JEL: O1 O2 O20 O42
    Date: 2015–05–20
  15. By: Ackah, Ishmael
    Abstract: It has been suggested that Africa’s growth is principally driven by natural resource rents. This is at variance with the growth in countries such as Korea and Taiwan where productivity has been identified as the main driver. In this study, the effect of energy consumption, investment, productivity on per capita growth in oil producing African countries is examined by employing a dynamic simultaneous panel data model. The simultaneous panel data model is able to examine the three-way causal relationship between energy consumption, productivity and economic growth. The results confirm the importance of income, productivity, price and investment influence the demand for renewable end non-renewable energy. The study recommends that there should be investment in productivity to enhance economic growth and minimize energy consumption.
    Keywords: Total Factor Productivity, Renewable Energy Consumption, Non-Renewable Energy Consumption, Economic Growth
    JEL: Q2 Q41 Q43
    Date: 2015–05–11
  16. By: Delis, Manthos; Gaganis, Chrysovalantis; Hasan, Iftekhar; Pasiouras, Fotios
    Abstract: We link genetic diversity in the country of origin of firms’ board members with corporate performance via board members’ nationality. We hypothesize that our approach captures deep-rooted differences in cultural, institutional, social, psychological, physiological, and other traits that cannot be captured by other recently measured indices of diversity. Using a panel of firms listed in the North American and U.K. stock markets, we find that adding board directors from countries with different levels of genetic diversity (either higher or lower) increases firm performance. This effect prevails when we control for a number of cultural, institutional, firm-level, and board member characteristics, as well as for the nationality of the board of directors. To identify the relationship, we use as instrumental variables for our diversity indices the migratory distance from East Africa and the level of ultraviolet exposure in the directors’ country of nationality.
    Keywords: Genetic diversity; corporate performance; nationality of board members
    JEL: G0 G00 G30 M21
    Date: 2015–06–01
  17. By: Simon Levin; Anastasios Xepapadeas
    Abstract: We seek to explain the emergence of spatial heterogeneity regarding development and pollution on the basis of interactions associated with the movement of capital and polluting activities from one economy to another. We use a simple dynamical model describing capital accumulation along the lines of a xed-savings-ratio Solow-type model capable of producing endogenous growth and convergence behavior, and pollution accumulation in each country with pollution diffusion between countries or regions. The basic mechanism underlying the movements of capital across space is the quest for locations where the marginal productivity of capital is relatively higher than the productivity at the location of origin. The notion that capital moves to locations of relatively higher productivity but not necessarily from locations of high concentration to locations of low concentration, does not face difficulties associated with the Lucas paradox. We show that, for a wide range of capital and pollution rates of flow, spatial heterogeneity emerges even between two economies with identical fundamental structures. These results can be interpreted as suggesting that the neoclassical convergence hypothesis might not hold under differential rates of flow of capital and polluting activities among countries of the same fundamental structure.
    Keywords: Transboundary flows, Capital, Pollution, Diffusion, Turing instability, Spatial heterogeneity
    JEL: O44 R12 Q52 C65
    Date: 2015–06–07
  18. By: Cecchetti, Stephen G; Kharroubi, Enisse
    Abstract: We examine the negative relationship between the rate of growth of the financial sector and the rate of growth of total factor productivity. Using a panel of 20 countries over 30 years, we establish that there is a robust correlation: the faster the financial sector expands, the slower the real economy grows. We then proceed to build a model in which this relationship arises from the fact that investment projects that are easier to pledge as loan collateral have lower productivity. As the financiers improve their ability to recover collateral in default, entrepreneurs expect credit to grow more quickly. As a consequence, they choose to invest in more pledgeable/less productive projects, reducing total factor productivity growth. We take this theoretical prediction to the data and find that financial growth disproportionately harms industries the less tangible their assets or the more R&D intensive they are.
    Keywords: asset tangibility; credit booms; financial development; growth; R&D intensity
    JEL: D92 E22 E44 O4
    Date: 2015–06
  19. By: Pierre Le Roux and Clement Moyo
    Abstract: Attaining high levels of economic growth and development has been one the goals of the Southern African Development Community (SADC). This paper investigates the relationship between financial liberalisation and economic growth in SADC countries. Annual data for the 15 SADC countries for the period 1985-2011 was used to develop a fixed effect model, generalised method of moments (GMM) as well as the fully-modified OLS (FMOLS) cointegration test. The results revealed that there is a positive relationship between financial liberalisation and economic growth in SADC but there is no long-run relationship between the two variables. This suggests that the relationship between financial liberalisation and economic growth is a short-run phenomenon. It is recommended that the SADC adopt measures to increase the level of financial openness in the region in order to increase economic growth. However, prior to the increase in the level of financial openness, well-defined property rights and a sound regulatory framework should be in place to monitor the financial liberalisation process in order to avoid financial crises.
    Keywords: Financial Liberalisation, economic growth, SADC
    Date: 2015

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