nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒06‒27
23 papers chosen by
Marc Klemp
Brown University

  1. Human Capital Persistence and Development By Rocha, Rudi; Ferraz, Claudio; Soares, Rodrigo R.
  2. Human Capital Quality and Aggregate Income Differences: Development Accounting for U.S. States By Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
  3. Debt into Growth: How Sovereign Debt Accelerated the First Industrial Revolution By Jaume Ventura; Hans-Joachim Voth
  4. The Impact of Political Competition on Economic Growth: Evidence from Municipalities in South Africa By Nonso Obikili
  5. Do Natural Disasters Stimulate Individual Saving? Evidence from a Natural Experiment in a Highly Developed Country By Michael Berlemann; Max Steinhardt; Jascha Tutt
  6. Agriculture in EuropeÕs Little Divergence: The Case of Spain By Carlos çlvarez-Nogal; Leandro Prados de la Escosura; Carlos Santiago-Caballero
  7. Do energy natural endowments matter? New Zealand and Uruguay in a comparative approach (1870-1940) By Reto Bertoni; Henry Willebald
  8. Fertility, Longevity and International Capital Flows By Zsofia Barany; Nicolas Coeurdacier; Stéphane Guibaud
  9. Micro-Data Evidence on Family Size and Chinese Saving Rates By Steven Lugauer; Jinlan Ni; Zhichao Yin
  10. "Municipal Technological Change in the 19th Century: The Diffusion of Steam-Powered Fire-Fighting Equipment" By Burton A. Abrams; Evangelos M. Falaris; James G. Mulligan
  11. Economic growth and debt: a simplified model By Krouglov, Alexei
  12. Number of Siblings and Educational Choices of Immigrant Children: Evidence from First- and Second-Generation Immigrants By Meurs, Dominique; Puhani, Patrick A.; von Haaren, Friederike
  13. Effects of income inequality on aggregate output By Brueckner,Markus; Lederman,Daniel
  14. Flexible Transitional Dynamics in a Non-Scale Fully Endogenous Growth Model By Pedro Mazeda Gil; André Almeida,; Sofia B.S.D. Castro,
  15. A Schumpeterian Growth Model with Financial Intermediaries By Miho Sunaga
  16. Macroeconomic Policy and potential growth By Jérôme Creel; Maurizio Iacopetta
  17. Labor mobility, structural change and economic growth By Jaime Alonso-Carrera; Xavier Raurich
  18. Foreign Aid, Donor Fragmentation, and Economic Growth By Kurt Annen; Stephen Kosempel
  19. Demography, urbanization and development : rural push, urban pull and... urban push ? By Jedwab,Remi Camille; Christiaensen,Luc; Gindelsky,Marina
  20. Does Agricultural Growth Reduce Inequality and Poverty in Developing Countries? By Katsushi S. Imai; Raghav GAIHA
  21. Economic growth and productive structure in an input/output model: An alternative coefficient sensitivity analysis (english version of working paper 11.08) By Vicent Alcantara
  22. Productivity lessons for the Asian region By Jungsoo Park, Lawrence Lau
  23. Growth effect of FDI in developing economies: The role of institutional quality. By C. Jude; G. Levieuge

  1. By: Rocha, Rudi (Federal University of Rio de Janeiro (IE-UFRJ)); Ferraz, Claudio (Pontifical Catholic University of Rio de Janeiro (PUC-Rio)); Soares, Rodrigo R. (Sao Paulo School of Economics)
    Abstract: This paper examines the role of human capital persistence in explaining long-term development. We exploit variation induced by a state-sponsored settlement policy that attracted a pool of immigrants with higher levels of schooling to particular regions of Brazil in the late 19th and early 20th century. We show that municipalities that received settlements experienced increases in schooling that persisted over time. One century after the policy, localities that received state-sponsored settlements had higher levels of schooling and income per capita. We provide evidence that long-run effects were driven by persistently higher supply and use of educational inputs and shifts in the structure of occupations towards skill-intensive sectors.
    Keywords: human capital, education, immigration, development
    JEL: O15 O18 N36
    Date: 2015–06
  2. By: Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
    Abstract: Although many U.S. state policies presume that human capital is important for state economic development, there is little research linking better education to state incomes. In a complement to international studies of income differences, we investigate the extent to which quality-adjusted measures of human capital can explain within-country income differences. We develop detailed measures of state human capital based on school attainment from census micro data and on cognitive skills from state- and country-of-origin achievement tests. Partitioning current state workforces into state locals, interstate migrants, and immigrants, we adjust achievement scores for selective migration. We use the new human capital measures in development accounting analyses calibrated with standard production parameters. We find that differences in human capital account for 20-35 percent of the current variation in per-capita GDP among states, with roughly even contributions by school attainment and cognitive skills. Similar results emerge from growth accounting analyses.
    JEL: I25 J24 O47
    Date: 2015–06
  3. By: Jaume Ventura; Hans-Joachim Voth
    Abstract: Why did the country that borrowed the most industrialize first? Earlier research has viewed the explosion of debt in 18th century Britain as either detrimental, or as neutral for economic growth. In this paper, we argue instead that Britain’s borrowing boom was beneficial. The massive issuance of liquidly traded bonds allowed the nobility to switch out of low-return investments such as agricultural improvements. This switch lowered factor demand by old sectors and increased profits in new, rising ones such as textiles and iron. Because external financing contributed little to the Industrial Revolution, this boost in profits in new industries accelerated structural change, making Britain more industrial more quickly. The absence of an effective transfer of financial resources from old to new sectors also helps to explain why the Industrial Revolution led to massive social change – because the rich nobility did not lend to or invest in the revolutionizing industries, it failed to capture the high returns to capital in these sectors, leading to relative economic decline.
    JEL: E22 E25 E62 H56 H60 N13 N23
    Date: 2015–06
  4. By: Nonso Obikili
    Abstract: This paper examines the impact of political competition on economic growth. Using results from the 1994 and 1999 elections I show that municipalities with a decisive vote either for or against the dominant national party have grown faster than municipalities with more voter competition amongst various political parties. I show that in democracies, governments with more freedom to make decisions and less threat from opposition political parties are associated with faster economic growth and improvement in supply of some public goods.
    Keywords: Political Competition, economic growth, Democracy, Voting Behaviour
    JEL: P16 O47 D72
    Date: 2015
  5. By: Michael Berlemann; Max Steinhardt; Jascha Tutt
    Abstract: While various empirical studies have found negative growth-effects of natural disasters, little is yet known about the microeconomic channels through which disasters might affect short- and especially long-term growth. This paper contributes to filling this gap in the literature by studying how natural disasters affect individual saving decisions. This study makes use of a natural experiment created by the European Flood of August 2002. Using micro data from the German Socio-Economic Panel that we combine with geographic flood data, we compare the savings behavior of affected and non-affected individuals by using a difference-in-differences approach. Our empirical results indicate that natural disasters depress individual saving decisions, which might be the consequence of a Samaritan`s Dilemma.
    Keywords: natural disasters, floods, growth, saving behavior, difference-in-differences approach
    JEL: Q54 D14 O16 H84
    Date: 2015
  6. By: Carlos çlvarez-Nogal (Universidad Carlos III); Leandro Prados de la Escosura (Universidad Carlos III and CEPR); Carlos Santiago-Caballero (Universidad Carlos III)
    Abstract: This paper explores the role of agriculture in SpainÕs contribution to the little divergence in Europe. On the basis of tithes collected by historians over the years, long-run trends in agricultural output are drawn. After a long period of relative stability, output suffered a severe contraction during 1570-1590, followed by milder deterioration to 1650. Output per head moved from a relatively high to a low path that persisted until the Peninsular War. The demand contraction, resulting from the collapse of domestic markets, monetary instability, and war in Iberia, helps to explain a less intensive use of labour and land as incentives to produce for the market sharply diminished. Agricultural output per head moved along population up to 1750. This finding confirms the view of Spain as a land abundant frontier economy. Only in the late eighteenth century a Malthusian pattern emerged.
    Keywords: agriculture, little divergence, early modern Spain, tithes, output per head
    JEL: N53 O13 Q10
    Date: 2015–06
  7. By: Reto Bertoni (Programa de Historia Económica y Social, Facultad de Ciencias Sociales, Universidad de la República); Henry Willebald (Instituto de Económia, Facultad de Ciencias Económicas y de Administración, Universidad de la República)
    Abstract: Settler economies are characterized by abundant natural resources, but natural capital is not homogeneous between countries and it can produce different consequences in terms of economic performance. This paper discusses the effect of natural resources on economic performance as part of the debate about the “curse of natural resources hypothesis”. We consider energy natural resources and focus on two settler societies, New Zealand and Uruguay. There is very little literature about the economic development of settler economies that identifies differences within the “club” countries that have different natural resources. We look for differences in energy natural endowments, basically coal and suitable conditions for hydroelectric generation, to explain at least partially the different welfare levels between the two economies. In the nineteenth century and the early decades of the twentieth century, New Zealand and Uruguay were similar in many ways such as production structure, movements in production factors and insertion in international markets, but there were huge differences in income per capita levels. To explain this, we need to study other aspects of the economic system. The analytical framework associated with the curse of natural resources offers some interesting lines of argument for our inquiry. The conformation of a “modern” production structure requires there to be sufficient energy supply at competitive costs, to justify exploiting the corresponding natural resources. Our analysis shows that New Zealand’s better performance in coal production and better natural conditions to generate electric energy at low cost –thus offering energy at low prices– explain those differences. New Zealand's advantage in energy endowments at least partially explains the development of a dairy sector, certain energy-intensive manufactures and a more efficient use of railways
    Keywords: settler economies, curse of the natural resources hypothesis, coal production, hydroelectric generation.
    JEL: N50 N70 Q41
    Date: 2015–04
  8. By: Zsofia Barany (Département d'économie); Nicolas Coeurdacier (Département d'économie); Stéphane Guibaud (Département d'économie)
    Abstract: The neoclassical growth model predicts large capital flows towards fast-growing emerging countries. We show that incorporating fertility and longevity into a lifecycle model of savings changes the standard predictions when countries differ in their ability to borrow inter-temporally and across generations through social security. In this environment, global aging triggers capital flows from emerging to developed countries, and countries’ current account positions respond to growth adjusted by current and expected demographic composition. Data on international capital flows are broadly supportive of the theory. The fact that fast-growing emerging countries are also aging faster, while having less developed credit markets and pension systems, explains why they are more likely to export capital. Our quantitative multi-country overlapping generations model explains a significant fraction of the patterns of capital flows, across time and across developed and emerging countries.
    Date: 2015–06
  9. By: Steven Lugauer (Department of Economics, University of Notre Dame); Jinlan Ni (University of Nebraska at Omaha); Zhichao Yin (Southwestern University of Finance and Economics)
    Abstract: This paper examines the impact of family size on household saving. We first study a theoretical life-cycle model that includes finite lifetimes and saving for retirement and in which parents care about the consumption of their dependent children. The model implies a negative relationship between the number of dependent children in the family and the household’s saving rate. Then, we test the model’s implications using a new data set on household finances in China. We use the differential enforcement of the one-child policy across counties to address the endogeneity between household saving and fertility decisions within a standard two-stage least squares Tobit regression. We find that Chinese families with fewer dependent children have significantly higher saving rates. The regressions also indicate that saving rates vary with age and tend to be higher for households with more workers, higher education, better health, and more assets.
    Keywords: China, Household Saving, Demographics, Overlapping Generations
    JEL: D12 D91 E21 J11 O12
    Date: 2014–06
  10. By: Burton A. Abrams (Department of Economics, University of Delaware); Evangelos M. Falaris (Department of Economics, University of Delaware); James G. Mulligan (Department of Economics, University of Delaware)
    Abstract: We provide the first empirical analysis of the diffusion pattern of the most important innovation in firefighting equipment during the latter half of the nineteenth century: steam powered water pumpers. We offer the first systematic empirical support for the hypothesis that local businesses influenced the timing of the initial adoption of this technology in order to facilitate a change from mostly autonomous volunteer firefighting organizations to a more professional and centralized municipal department.
    Keywords: Technological Change, Diffusion, Urban Economic History, Firefighting Technology
    JEL: N41 O33
    Date: 2015
  11. By: Krouglov, Alexei
    Abstract: Presented is a mathematical model of single-product economy where an investment and debt are used to alter the demand for and supply of product. Explored is the dynamics of a nominal economic growth and decline. Examined are cases of a constant-rate growing debt and a constant-rate and constant-acceleration growing investment.
    Keywords: debt; investment; modeling
    JEL: E22 E32 E51
    Date: 2015–06–21
  12. By: Meurs, Dominique (University Paris Ouest-Nanterre); Puhani, Patrick A. (Leibniz University of Hannover); von Haaren, Friederike (NIW Hannover, Leibniz Universität Hannover)
    Abstract: We document the educational integration of immigrant children with a focus on the link between family size and educational decisions and distinguishing particularly between first- and second-generation immigrants and between source country groups. First, for immigrant adolescents, we show family-size adjusted convergence to almost native levels of higher education track attendance from the first to the second generation of immigrants. Second, we find that reduced fertility is associated with higher educational outcomes for immigrant children, possibly through a quantity-quality trade-off. Third, we show that between one third and the complete difference in family-size adjusted educational outcomes between immigrants from different source countries or immigrant generations can be explained by parental background. This latter holds true for various immigrant groups in both France and Germany, two major European economies with distinct immigration histories.
    Keywords: migration, integration, quantity-quality trade-off, decomposition
    JEL: J13 J15 J24
    Date: 2015–06
  13. By: Brueckner,Markus; Lederman,Daniel
    Abstract: This paper estimates the effect of income inequality on real gross domestic product per capita using a panel of 104 countries during the period 1970?2010. The empirical analysis addresses endogeneity issues by using instrumental variables estimation and controlling for country and time fixed effects. The analysis finds that, on average, income inequality has a significant negative effect on transitional gross domestic product per capita growth and the long-run level of gross domestic product per capita. However, the impact varies by the level of economic development, so much so that in poor countries income inequality has a significant positive effect on gross domestic product per capita.
    Keywords: Pro-Poor Growth,Economic Theory&Research,Services&Transfers to Poor,Inequality,Poverty Impact Evaluation
    Date: 2015–06–22
  14. By: Pedro Mazeda Gil (University of Porto, Faculty of Economics, and cef.up); André Almeida, (University of Porto, Faculty of Economics); Sofia B.S.D. Castro, (University of Porto, Faculty of Economics, and CMUP)
    Abstract: This paper develops a non-scale growth model of physical capital accumulation and two types of lab-equipment R&D, where both the intensive and extensive margins of growth are fully endogenous. We study analytically the long-run equilibrium stability and transitional dynamics properties of the model, and establish meaningful sufficient conditions for saddle-path stability. We relate the different combinations of initial conditions of the dynamical system with the observation of monotonic versus non-monotonic transitional dynamics. Our model is able to predict monotonic, hump-shaped and inverted hump-shaped trajectories, therefore encompassing the evidence reported by the empirical literature for distinct subsets of countries.
    Keywords: Keywords: endogenous growth, non-monotonic transitional dynamics, R&D, lab equipment, physical capital
    JEL: O41 O31
    Date: 2015–06
  15. By: Miho Sunaga (Graduate School of Economics, Osaka University)
    Abstract: This study introduces financial intermediaries into the Schumpeterian growth model developed by Aghion, Howitt, and Mayer-Foulkes (2005). They collect deposits from households, provide funds for entrepreneurial projects, and monitor the entrepreneurs. I consider an economy with moral hazard problems: entrepreneurs can hide the result of a successful innovation and thereby avoid repaying financial intermediaries if the latter do not monitor entrepreneurial performance. I analyze the effects of financial interme- diariesf activities on technological progress and economic growth in such an economy. I show that financial intermediaries need to monitor entrepreneurs in an economy where the legal protection of creditors is not strong enough. Such monitoring can resolve the moral hazard problem; however, it does not always promote technological innovation, because it could increase the cost of entrepreneurial innovation and thus reduce the amount invested for innovation. I also examine how monitoring by financial intermedi- aries affects the welfare of individuals through the stringency of financial markets.
    Keywords: conomic growth, Innovation, Financial intermediaries, Monitoring
    JEL: G21 O16 O41
    Date: 2015–06
  16. By: Jérôme Creel (OFCE Sciences Po & ESCP-Europe); Maurizio Iacopetta (OFCE-SciencesPo & SKEMA Business School)
    Abstract: We make the case for investigating the gap between the potential and the actual level of production, and review contributions that point to the reduced power of standard policy in- struments in presence of a prolonged gap. We also highlight di¢ culties in measuring where an economy stands relative to its potential. We review links between human capital accumulation and technology, and sketch a basic Schumpeterian model that puts at the center stage of the growth process investments in innovation and the foundation of new Örms, arguably two key sources of growth that could revitalize the faltering European Economies. The gap between the short and long run behavior is illustrated through quantitative experiments.
    Date: 2015–05
  17. By: Jaime Alonso-Carrera (Universidade de Vigo); Xavier Raurich (Universitat de Barcelona)
    Abstract: This paper develops a two-sector growth model in which the process of structural change in the sectoral composition of employment and GDP is jointly determined by non-homothetic preferences and labor mobility cost. This cost, paid by workers moving to another sector, limits structural change. Our model can explain the following patterns of development of the US economy throughout the period 1880-2000: (i) balanced growth of the aggregate variables in the second half of the last century; (ii) structural change in the sectoral composition of employment between agriculture and non-agriculture sectors; (iii) structural change process in the sectoral composition of GDP between these sectors; and (iv) wage convergence between the two sectors. We outline that the last two patterns can only be explained if labor mobility cost is introduced. Results reveal that mobility cost generates a misallocation of production factors. This implies a loss of GDP which amounts to over 30% of the GDP throughout initial periods according to the calibrated model. During the transition, the loss of GDP decreases and eventually vanishes. Thus, the elimination of the misallocation explains part of the increase in the GDP. Additionally, this study points out that misallocation introduces a mechanism through which cross-country differences in sectoral composition may account for cross-country income differences.
    Keywords: Structural change, Non-homothetic preferences, Labor mobility .
    JEL: O41 O47
    Date: 2015
  18. By: Kurt Annen (Department of Economics and Finance, University of Guelph); Stephen Kosempel (Department of Economics and Finance, University of Guelph)
    Abstract: This paper analyzes the impact of foreign aid on growth. It differs from the existing literature in at least two important ways. First, we differentiate between foreign aid as technical assistance and non-technical assistance, and demonstrate both theoretically and empirically that this distinction is important. Second, we test the hypothesis that the effectiveness of aid depends on its level of fragmentation. To preview our main results: non-technical assistance has no statistically significant impact on growth; but technical assistance has a positive and significant impact, except in countries where it is highly fragmented.
    Keywords: foreign aid, technical assistance, donor fragmentation, growth
    JEL: F35 F43 F34 O11
    Date: 2015
  19. By: Jedwab,Remi Camille; Christiaensen,Luc; Gindelsky,Marina
    Abstract: Developing countries have urbanized rapidly since 1950. To explain urbanization, standard models emphasize rural-urban migration, focusing on rural push factors (agricultural modernization and rural poverty) and urban pull factors (industrialization and urban-biased policies). Using new historical data on urban birth and death rates for seven countries from Industrial Europe (1800?1910) and thirty-five developing countries (1960?2010), this paper argues that a non-negligible part of developing countries? rapid urban growth and urbanization may also be linked to demographic factors, such as rapid internal urban population growth, or an urban push. High urban natural increase in today?s developing countries follows from lower urban mortality, relative to Industrial Europe, where higher urban deaths offset urban births. This compounds the effects of migration and displays strong associations with urban congestion, providing additional insight into the phenomenon of urbanization without growth.
    Keywords: Pro-Poor Growth,National Urban Development Policies&Strategies,Population Policies,Regional Urban Development,Urban Housing and Land Settlements
    Date: 2015–06–23
  20. By: Katsushi S. Imai (Economics, School of Social Sciences, University of Manchester, UK and Research Institute for Economics and Business Administration, Kobe University); Raghav GAIHA (Faculty of Management Studies, University of Delhi, India and Harvard School of Public Health, Harvard University Boston, USA)
    Abstract: Drawing upon cross-country panel data for developing countries, the present study examines the role of agricultural growth in reducing inequality and poverty by modelling the dynamic linkage between agricultural and non-agricultural sectors. For this purpose, we have compared the role of agricultural growth and that of non-agricultural growth and have found that agricultural growth is more important in reducing inequality and poverty. The role of agricultural growth in reducing inequality is, however, undermined by ethnic fractionalisation which tends to make inequality more persistent. Our analysis reinforces the case for revival of agriculture in the post-2015 discourse, contrary to the much emphasised roles of rural-urban migration and urbanisation as main drivers of growth and elimination of extreme poverty.
    Keywords: Inequality, Poverty, Growth, Agriculture, Non-agriculture, MDG
    JEL: C20 I15 I39 O13
    Date: 2015–06
  21. By: Vicent Alcantara (Departament d’Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: Taking into account the relationship between the eigenvalue of the matrix of technical coefficients and the rate of growth in a simple Leontief model, a measure of the sensitivity of the coefficients of such matrix is proposed. This allows to determine the importance of the impact of changes in the different coefficients on the rate of production growth of the system. Moreover, an extension of this approach to the analysis of the growth of other variables linked to production is proposed.
    Keywords: Growth, input–output model, coefficients sensitivity, elasticities
    Date: 2015–06
  22. By: Jungsoo Park, Lawrence Lau
    Abstract: This study investigates how the patterns of productivity growth have changed over the past few decades for the Asian economies in comparison with the advanced economies. The findings indicate that the Asian economies are in the process of transition in terms of pattern of growth. It seems that the 4 NIEs have already transitioned from input-based growth to productivity-based growth, and the remaining Asian economies are starting to show signs of transition in the past decade. Scrutinizing the recent trends in human capital, R&D, patent statistics, and inward FDIs, they all indicate that the productivity growth will be stronger in the Asian region than before and will constitute the major basis for growth.
    Keywords: total factor productivity, Asian economies, economic growth
    JEL: O47 O57
    Date: 2015–04
  23. By: C. Jude; G. Levieuge
    Abstract: This paper investigates the effect of FDI on economic growth conditional on the institutional quality of host countries. We first develop several theoretical arguments to show that institutional heterogeneity may be an explanation for the mixed results of previous empirical studies. Second, using a Panel Smooth Regression model on a large sample of developing countries, we show that FDI has a positive effect on growth only beyond a certain threshold of institutional quality. In order to benefit from FDI-led growth, institutional reforms should thus precede FDI attraction policies. Additionally, some reforms seem to promote faster marginal effects of FDI, while institutional complementarities may lead to an incremental effect on growth.
    Keywords: FDI, growth, heterogeneity, institutional quality, PSTR, Developing economies
    JEL: F21 C34 F43 O16
    Date: 2015

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