nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒07‒04
sixteen papers chosen by
Marc Klemp
Brown University

  1. Ancestry, Language and Culture By Enrico Spolaore; Romain Wacziarg
  2. Human Capital Quality and Aggregate Income Differences: Development Accounting for U.S. States By Hanushek, Eric A.; Ruhose, Jens; Woessmann, Ludger
  3. The Two Revolutions, Landed Elites and Education during the Industrial Revolution By Duarte Nuno Leite; Óscar Afonso; Sandra Tavares Silva
  4. Capital Cities, Conflict, and Misgovernance: Theory and Evidence By Filipe R. Campante; Quoc-Anh Do; Bernardo Guimaraes
  5. 'Organized Crime, Corruption and Growth: Theory and Evidence' By Keith Blackburn; Kyriakos C. Neanidis; Maria Paola Rana
  6. Ethnic Diversity and the Efficiency of Public Spending in Developing Countries By Urbain Thierry YOGO
  7. Isolated Capital Cities, Accountability and Corruption: Evidence from US States By Filipe R. Campante; Quoc-Anh Do
  8. Agriculture in Europe's little divergence: the case of Spain By Carlos Álvarez Nogal; Leandro Prados de la Escosura; Carlos Santiago Caballero
  9. Human capital productivity and uncertainty By AZOMAHOU; Bity DIENE; Mbaye DIENE
  10. Agglomeration Economies and Productivity Growth: U.S. Cities, 1880-1930 By Crafts, Nicholas; Klein, Alexander
  11. Foreign Aid and Economic Growth in Developing Countries: An Instrumental Variables Approach By Arvind Magesan
  12. Trust, Well-Being and Growth: New Evidence and Policy Implications By Yann Algan; Pierre Cahuc
  13. 'Are human and social capital linked? Evidence from India' By Baris Alpaslan
  14. Dynamics of Growth, Poverty and Human Capital: Evidence from Indonesian Sub-National Data. By de Silva, Indunil; Sumarto, Sudarno
  15. Inequality of income and wealth in the long run: A Kaldorian perspective By Soon, Ryoo;
  16. Technology, Skill, and Growth in a Global Economy By Jaewon Jung

  1. By: Enrico Spolaore; Romain Wacziarg
    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 o 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.
  2. By: Hanushek, Eric A. (Stanford University); Ruhose, Jens (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research)
    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.
    Keywords: economic growth, human capital, cognitive skills, schooling, U.S. states
    JEL: I25 O47 J24
    Date: 2015–06
  3. By: Duarte Nuno Leite (Munich Cenyter for Economics of Aging); Óscar Afonso (University of Porto, Faculty of Economics); Sandra Tavares Silva (University of Porto, Faculty of Economics)
    Abstract: How we are to understand the Industrial Revolution, the process of transition from a Malthusian equilibrium to today’s Modern Economic Growth, has been the subject of passionate debate. This paper adds more insights to the process of industrialization and the demographic transition that followed this period. By applying the theory of interest groups to landownership and by analyzing landed elites incentives to allow education, it is shown that their political power is important for an understanding of the main events that marked the Industrial Revolution. Contributions are also made to the existence and role of the Agricultural Revolution. It is advanced that it played a significant role in hastening the process of industrialization. A model and numerical simulations are presented to demonstrate these results.
    Keywords: Industrial and Agricultural Revolution; Demographic Transition; Education; Interest Groups.
    JEL: N53 O13 O14 O43
    Date: 2015–06
  4. By: Filipe R. Campante (Harvard University); Quoc-Anh Do (Département d'économie); Bernardo Guimaraes (Sao Paulo School of Economics)
    Abstract: Motivated by a novel stylized fact - countries with isolated capital cities display worse quality of governance - we provide a framework of endogenous institutional choice based on the idea that elites are constrained by the threat of rebellion, and that this threat is rendered less effective by distance from the seat of political power. In established democracies, the threat of insurgencies is not a binding constraint, and the model predicts no correlation between isolated capitals and misgovernance. In contrast, a correlation emerges in equilibrium in the case of autocracies. Causality runs both ways: broader power sharing (associated with better governance) means that any rents have to be shared more broadly, hence the elite has less of an incentive to protect its position by isolating the capital city; conversely, a more isolated capital city allows the elite to appropriate a larger share of output, so the costs of better governance for the elite, in terms of rents that would have to be shared, are larger. We show evidence that this pattern holds true robustly in the data. We also show that isolated capitals are associated with less power sharing, a larger income premium enjoyed by capital city inhabitants, and lower levels of military spending by ruling elites, as predicted by the theory.
    Keywords: Capital Cities; Governance; Institutions; Conflict; Civil War; Revolutions; Insurgencies; Population Concentration; Democracy; Power Sharing; Inefficient Institutions
    JEL: D02 D74 O18 R12
    Date: 2014–09
  5. By: Keith Blackburn; Kyriakos C. Neanidis; Maria Paola Rana
    Abstract: We develop a framework for studying the interactions between organized crime and corruption, together with the individual and combined effects of these phenomena on economic growth. Criminal organizations co-exist with law-abiding productive agents and potentially corrupt law enforcers. The crime syndicate obstructs the economic activities of agents through extortion, and may pay bribes to law enforcers in return for their compliance in this. We show how organized crime has a negative e¤ect on growth, and how this e¤ect may be either enhanced or mitigated in the presence of corruption. The latter of these possibilities is evidenced strongly in an exhaustive empirical investigation using a panel of Italian regions for the period 1983-2009.
    Date: 2015
  6. By: Urbain Thierry YOGO
    Abstract: This paper examines the effect of ethnic diversity on the efficiency of public spending in a set of developing countries. For this purpose, we use Data Envelopment Analysis to assess the efficiency of public spending in the sectors of health, education and infrastructure in 77 developing countries over the period 1996-2012. Further, we investigate the effect of ethnic diversity on the cross country variation in efficiency. Two main findings emerge. First, barely 12% of the sample of countries under study makes an efficient use of public expenditure. Second, no matters the level of aggregation, ethnic polarization is positively associated with higher efficiency. In contrast, ethnic fractionalization does have a negative or at the best no effect on efficiency, especially at the finest level of disaggregation.
    Keywords: Ethnic diversity, Public spending efficiency, developing countries
    JEL: O23 O11 H5
    Date: 2015–06
  7. By: Filipe R. Campante (Harvard University); Quoc-Anh Do (Département d'économie)
    Abstract: We show that isolated capital cities are robustly associated with greater levels of corruption across US states, in line with the view that this isolation reduces accountability. We then provide direct evidence that the spatial distribution of population relative to the capital affects different accountability mechanisms: newspapers cover state politics more when readers are closer to the capital, voters who live far from the capital are less knowledgeable and interested in state politics, and they turn out less in state elections. We also find that isolated capitals are associated with more money in state-level campaigns, and worse public good provision.
    Keywords: Isolated Capital Cities; Corruption; Accountability; US states
    JEL: D72 D73 H41 H83 K42
    Date: 2014–08
  8. By: Carlos Álvarez Nogal; Leandro Prados de la Escosura; Carlos Santiago Caballero
    Abstract: This paper explores the role of agriculture in Spain's 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
  9. By: AZOMAHOU; Bity DIENE (Université d'Auvergne(UdA)); Mbaye DIENE
    Abstract: Several policies or interventions have been implemented in developing countries with the ultimate goal of improving educational outcomes and human capital. While lots of empirical studies have pointed to mixed results of these interventions, the role of uncertainty arising from the state of the nature about educational environment, household characteristics, along- side the efficiency of these interventions still lack economic mechanism. This paper aims at developing a theoretical framework that links policy interventions to educational outcomes. We characterize optimal policies and determine the conditions for enhancing social welfare. We also study the optimal growth of the economy under uncertainty and population heterogeneity when human capital is produced and used in the education sector. We show that the growth rate of the unskilled population has a direct impact on the growth of human and physical capitals.
    Keywords: Educational outcome, policy interventions, social welfare, skilled and unskilled labor, endogenous growth
    JEL: C61 O15 J13 I31 I25
    Date: 2015–04
  10. By: Crafts, Nicholas; Klein, Alexander
    Abstract: We investigate the role of industrial structure in productivity growth in U.S. cities between 1880 and 1930 using a new dataset constructed from the Census of Manufactures. We find that increases in specialization were associated with faster productivity growth but that diversity only had positive effects on productivity performance in large cities. We interpret our results as providing strong support for the importance of Marshallian externalities. Industrial specialization increased considerably in U.S. cities in the early 20th century, probably as a result of improved transportation, and we estimate that this resulted in significant gains in labor productivity
    Keywords: agglomeration economies; industrial structure; Jacobian externalities; manufacturing productivity; Marshallian externalities
    JEL: N91 N92 R32
    Date: 2015–06
  11. By: Arvind Magesan (University of Calgary)
    Abstract: There is little consensus on the capacity for foreign aid to cause economic growth in developing countries. This is due in large part to the fact that foreign aid recipients are selected by donors, confounding identification. This paper proposes an identification strategy that exploits exogenous variation in foreign aid receipts generated by participation in Human Rights Treaties at the UN to identify an average causal effect of aid on growth. Our approach is valid even if the effect of aid is heterogeneous across recipients for unobservable reasons. We find that an additional dollar of per capita aid causes the growth rate in a recipient country to increase by 8% over four years and 5% over a decade. The effect is explained almost entirely by an expansion of the service industry, accompanied by a large increase in household consumption, with no evidence that aid causes "Dutch disease," as many fear it does. We conclude that aid increases growth by inducing a structural change in household demand for services.
    Date: 2015–06–25
  12. By: Yann Algan (Département d'économie); Pierre Cahuc (Department of Economics)
    Abstract: This survey reviews the recent research on trust, institutions, and economic development. It discusses the various measures of trust and documents the substantial heterogeneity of trust across space and time. The conceptual mechanisms that explain the influence of trust on economic performance and the methods employed to identify the causal impact of trust on economic performance are reviewed. We document the mechanisms of interactions between trust and economic development in the realms of finance, innovation, the organization of firms, the labor market, and the product market. The last part reviews recent progress to identify how institutions and policies can affect trust.
    Keywords: Trust; Growth; Economic Development; Institutions; Well-being
    JEL: O11 O43 Z13
    Date: 2014
  13. By: Baris Alpaslan
    Abstract: This paper develops a two-period Overlapping Generations (OLG) model of endogenous growth in which a two-way relationship between social capital and human capital is studied. In order to illustrate the impact of public policies, the model is calibrated using the data for a low-income country, India and a sensitivity analysis is reported under di¤erent parameter con...gurations. Based on the numerical analysis, this paper focuses on possible trade-offs in the allocation of government spending between two productive components, that is, social capital-related activities and education. The results of this paper show that a higher share of spending on education promotes growth despite an offsetting cut in social capital-related activities; however, the reverse entails trade-o¤s. In other words, an increase in the share of spending on social capital-related activities through a concomitant cut in education is detrimental to long-run growth.
    Date: 2015
  14. By: de Silva, Indunil; Sumarto, Sudarno
    Abstract: The aim of this study is twofold. First, despite the vast empirical literature on testing the neoclassical model of economic growth using cross-country data, very few studies exist at the sub-national level. We attempt to fill this gap by utilizing panel data over the 2002-2012 period, a modified neoclassical growth equation, and a dynamic panel estimator to investigate the effect of both health and education capital on economic growth and poverty at the district level in Indonesia. Secondly, whilst most existing cross-country studies tend to concentrate only on education as a measure of human capital, we expand the analysis and probe the effects of health capital as well. As far as we are aware, no study has done a direct and comprehensive examination of the impacts of health on growth and poverty at the sub-national level. Thus this study is a premier at the sub-national level, and our findings will be particularly relevant in understanding the role of both health and education capital in accelerating growth and poverty reduction efforts.
    Keywords: Neoclassical Growth, Poverty, Human Capital, Health, Education, Dynamic Panel
    JEL: H7 I3 O4
    Date: 2014–01–16
  15. By: Soon, Ryoo (Department of Finance and Economics, Adelphi University);
    Abstract: The paper examines the determinants of income and wealth inequality in a Kaldorian model where the profit share adjusts to clear the goods market and the long-run output-capital ratio is constant. The approach is radically different from both the mainstream approach that stresses properties of production function and the Kaleckian approach that emphasizes the long-run adjustment of utilization. The Kaldorian model is used to identify several developments that may have caused increasing inequality in income and wealth since the early 1980s, including the shift of the power relation in corporate firms in favor of top managerial pay, the decline in the retention rate, increasing share buybacks, rising indebtedness of lower-income households, and the stock market boom in the 1990s. In contrast to Piketty's explanation, the decline in the natural rate of growth reduces inequality of income and wealth in this Kaldorian framework.
    Keywords: income and wealth distribution, managerial pay, financialization, stock- flow consistency
    JEL: E12 E21 E25 E44
    Date: 2015
  16. By: Jaewon Jung (Université de Cergy-Pontoise, THEMA)
    Abstract: This paper develops an endogenous growth model based on a Roy-like assignment model in which heterogeneous workers endogenously sort into different technologies/tasks according to their comparative advantage. By modeling explicit distinction between worker skills and tasks, as well as incorporating taskspecific technologies, worker skill distribution and heterogeneous firms, we analyze in depth the technology-skill-growth and offshoring-growth links that are absent in traditional models of endogenous growth. The model provides therefore richer predictions on the relationship between labor market changes and growth due to technology up- and downgrading mechanism at both individual worker and firm levels.
    Keywords: Endogenous growth, Technology-augmented skill distribution,Worker/firm heterogeneity, Offshoring, Skill upgrading/polarization
    JEL: F43 J24 O4
    Date: 2015

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