nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒07‒11
fifteen papers chosen by
Marc Klemp
Brown University

  1. Is Industrialization Conducive to Long-Run Prosperity? By Franck, Raphaël; Galor, Oded
  2. Fuel for Economic Growth? By Gars, Johan; Olovsson, Conny
  3. The Great Divergence: A Network Approach By Holger Strulik
  4. Debt into Growth: How Sovereign Debt Accelerated the First Industrial Revolution By Jaume Ventura; Hans-Joachim Voth
  5. Human Capital and the Dynamic Effects of Trade By Auer, Raphael
  6. Early Maternal Time Investment and Early Child Outcomes By del Bono, Emilia; Francesconi, Marco; Kelly, Yvonne; Sacker, Amanda
  7. Endogenous Labor Share Cycles: Theory and Evidence By Peter McAdam; Jakub Muck; Jakub Growiec
  8. An Empirical Note on Tribalism and Government Effectiveness By Oasis Kodila-Tedika; Simplice Asongu
  9. Intelligence, Human Capital and HIV/AIDS: Fresh Exploration By Oasis Kodila-Tedika; Simplice Asongu
  10. Population Density, Fertility, and Childcare Services From the Perspective of a Two-Region Overlapping Generations Model By Ishida, Ryo; Oguro, Kazumasa; Yasuoka, Masaya
  11. Foreign Direct Investment and Economic Growth By Guido Baldi; Jakob Miethe
  12. Economic Implications of Historically Evolved Self-Efficacy: Agent-Based Modeling and Empirical Evidence from Rural Ghana By Wuepper, David; Drosten, Barbara
  13. Inequality, Economic Growth and Structural Change: Theoretical Links and Evidence from Latin American Countries By Mario D. Tello
  14. On the cointegration and causality between Oil market, Nuclear Energy Consumption, and Economic Growth: Evidence from Developed Countries By Naser, Hanan
  15. Causality and cointegration between export, import and economic growth: evidence from Morocco By El Alaoui, Aicha

  1. By: Franck, Raphaël (Bar-Ilan University); Galor, Oded (Brown University)
    Abstract: This research explores the long-run effect of industrialization on the process of development. In contrast to conventional wisdom that views industrial development as a catalyst for economic growth, the study establishes that while the adoption of industrial technology was conducive to economic development in the short-run, it has had a detrimental effect on standards of living in the long-run. Exploiting exogenous source of regional variation in the adoption of steam engines during the French industrial revolution, the research establishes that regions in which industrialization was more intensive experienced an increase in literacy rates more swiftly and generated higher income per capita in the subsequent decades. Nevertheless, intensive industrialization has had an adverse effect on income per capita, employment and equality by the turn of the 21st century. This adverse effect reflects neither higher unionization and wage rates nor trade protection, but rather underinvestment in human capital and lower employment in skilled-intensive occupations. These findings suggest that the characteristics that permitted the onset of industrialization, rather than the adoption of industrial technology per se, have been the source of prosperity among the currently developed economies that experienced an early industrialization.
    Keywords: economic growth, industrialization, steam engine
    JEL: N33 N34 O14 O33
    Date: 2015–06
  2. By: Gars, Johan (GEDB, Royal Swedish Academy of Sciences); Olovsson, Conny (Research Department, Central Bank of Sweden)
    Abstract: We set up an endogenous growth model in which the efficiency of both capital and fossil energy can be improved, whereas the efficiency of one alternative energy source is limited. With capital and energy as complements, there exist two steady states: one stagnant where energy is fully derived from the alternative energy source, and one with balanced growth where energy is fully sourced from fossil fuel. Heterogeneity in initial TFP levels can generate the Great Divergence. The demand for fossil fuel in technologically advanced countries drives up its price and makes fossil fuel too costly in less advanced countries that choose the alternative and stagnant energy input.
    Keywords: Growth; Malthusian stagnation; Industrial Revolution; Great Divergence; Technological progress
    JEL: O11 O14 O33 O41 O50
    Date: 2015–05–01
  3. By: Holger Strulik (University of Goettingen)
    Abstract: We present a multi-country theory of economic growth in which countries are connected by a network of mutual knowledge exchange. Knowledge in any country depends on the human capital of the countries it exchanges knowledge with. The diffusion of knowledge throughout the world explains a period of increasing world inequality after the take-off of the forerunners of the industrial revolution, followed by decreasing relative inequality. Knowledge diffusion through a Small World network explains the 'New Kaldor facts' and produces an extraordinary diversity of country growth performances, including the overtaking of individual countries in the course of world development.
    Date: 2015
  4. 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.
    Keywords: crowding out, debt crises, Industrial Revolution, Ricardian equivalence, mis-allocation, financial repression, structural change, productivity
    JEL: E22 E25 E62 H56 H60 N13 N23
    Date: 2015–05
  5. By: Auer, Raphael
    Abstract: This paper examines the cross-country income and welfare consequences of trade-induced human capital (dis-)accumulation. The model is based on heterogeneous workers who make educational decisions in the presence of complete markets. When such heterogeneous workers invest in schooling, high type agents earn a surplus from their investment. In the presence of cross-country differences in skill-augmenting technology, trade shifts this surplus to rich countries that can use skills more efficiently. Thus, while the static gains from trade may lead to convergence, the dynamic gains from trade occur to initially rich countries, thus leading to cross-country divergence of income and welfare. The second part of the paper endogenizes world prices, documenting that as trade liberalization concentrates skills in countries with a high level of skill augmenting technology, it thereby increases the effective global supply of skilled labor. Despite the resulting decline in the price of skill-intensive goods, trade is shown to be skill-biased.
    Keywords: economic growth; employment; factor content of trade; human capital; import competition
    JEL: E24 F11 F14 F16 J24 O11 O4
    Date: 2015–07
  6. By: del Bono, Emilia; Francesconi, Marco; Kelly, Yvonne; Sacker, Amanda
    Abstract: Using large longitudinal survey data from the UK Millennium Cohort Study, this paper estimates the relationship between maternal time inputs and early child development. We find that maternal time is a quantitatively important determinant of skill formation and that its effect declines with child age. There is evidence of long-term effects of early maternal time inputs on later outcomes, especially in the case of cognitive skill development. In the case of non-cognitive development, the evidence of this long-term impact disappears when we account for skill persistence.
    Keywords: Cognitive and non-cognitive skill formation; Early interventions; Education production functions
    JEL: I20 J15 J24
    Date: 2015–07
  7. By: Peter McAdam (European Central Bank); Jakub Muck (Narodowy Bank Polski); Jakub Growiec (Warsaw School of Economics & NBP)
    Abstract: Based on long US time series we document a range of empirical properties of the labor's share of GDP, including its substantial medium-run swings. We explore the extent to which these empirical regularities can be explained by a calibrated micro-founded long-run economic growth model with normalized CES technology and endogenous labor- and capital-augmenting technical change driven by purposeful directed R&D investments. It is found that dynamic macroeconomic trade-offs created by arrivals of both types of new technologies may lead to prolonged swings in the labor share due to oscillatory convergence to the balanced growth path as well as stable limit cycles via Hopf bifurcations. Both predictions are broadly in line with the empirical evidence.
    Date: 2015
  8. By: Oasis Kodila-Tedika (Université de Kinshasa Département d’Eco); Simplice Asongu (Yaoundé/Cameroun)
    Abstract: This study assesses the relationship between tribalism (the tribalism index) and government effectiveness (per the World Bank) in 65 countries using cross-sectional data averages from 2000-2010. This study finds that countries with high-tribal populations generally enjoy bad governance in terms of government ineffectiveness. Government ineffectiveness and tribalism are found to mutually reinforce each other in a robust relationship.
    Keywords: Institutions, Tribalism, Government effectiveness
    JEL: D02 D73 I20 O55
    Date: 2015–06
  9. By: Oasis Kodila-Tedika (Université de Kinshasa Département d’Eco); Simplice Asongu (Yaoundé/Cameroun)
    Abstract: This study complements existing literature on the relationship between HIV/AIDS and human capital by introducing previously unexplored indicators as well as more robust empirical strategies. The overarching purpose is to assess whether previous findings on the relationship withstand empirical scrutiny when alternative indicators and methodologies are employed. Four main HIV/AIDS measurements are regressed on intelligence for a maximum of 195 cross-sectional averages over the past decade. The empirical evidence is based on OLS, IWLS and 2SLS. The following findings are established. First, human capital decreases HIV prevalence with the magnitude on ‘Women’s share of population ages 15+ living with HIV’ substantially higher. This implies improving average human capital levels across communities would be more beneficial to girls above the age of 15 living with HIV. The relatively similar negative magnitudes across other dependent variables implies that increasing human capital decreases deaths from HIV/AIDS by almost the same rate as it reduces infections to the disease. Moreover, the HIV infection rate in children between the ages of 0 and 14 does not significantly change with human capital improvements. More policy implications are discussed.
    Keywords: Health; Human capital; Intelligence
    JEL: D60 I10 I20 J24 O15
    Date: 2015–06
  10. By: Ishida, Ryo; Oguro, Kazumasa; Yasuoka, Masaya
    Abstract: In countries confronting the issue of low fertility, as Japan is, dual trends showing higher regional population density associated with lower fertility rates are being confirmed. It is therefore an important theme for analysis to deepen discussions related to reducing regional fertility disparities by increasing fertility through the implementation of comprehensive childcare support policies, which might facilitate the striking of a balance between child-rearing and work, even in highly populated regions. As described herein, we constructed a simple theoretical two-region Overlapping Generations (OLG) by incorporating migration and land prices. Using it, we analyzed effects of population density and childcare services on fertility. Results elucidated the following three points. First, in the presence of congestion costs associated with increased population density, the fertility rate of the region decreases with increased population density. However, if the time cost of child-rearing is brought down by raising the level of the childcare services provided in the region, then the effect of increased population density on fertility can be restrained. Second, when the effect of population size on productivity is less than a certain level, improvement in the childcare services raises the relative ratio of the population density. When the effect of population size on productivity exceeds a certain level, however, the relative ratio of the population density decreases if the relative ratio of the time cost of child-rearing decreases as a result of childcare service reform. Third, where each region imposes payroll tax on its residents and uses its tax revenue as the financial resources to adopt a decentralized strategy of providing childcare services to its region, the level of childcare services that maximizes the utility of a representative agent in each region is independent of the childcare services of any other region. Therefore, manipulation of the level of childcare services becomes a dominant strategy.
    Keywords: population density, fertility, congestion, migration, childcare services, overlapping generation (OLG)
    JEL: H40 J13 J61 R10 R12 R23
    Date: 2015–06
  11. By: Guido Baldi; Jakob Miethe
    Abstract: Various proposals are currently being suggested to encourage higher foreign direct investment in countries within the euro area, particularly between individual member states. The intended goal is to assist in stimulating economic growth in the euro area. Against this background, this article provides an overview of the large and heterogeneous academic literature on the influence of direct investment on economic growth. The results of the existing studies indicate that direct investment often acts as a kind of catalyst and that a positive influence on economic growth becomes more probable when a country has a population with a high level of education, high-quality infrastructure, or a developed financial system.
    Date: 2015
  12. By: Wuepper, David; Drosten, Barbara
    Abstract: We argue that self-efficacy is important for economic performance. Self-efficacy is at the psychological core of agency and entrepreneurship. It enables people to learn, and change and act to better their livelihood. In an agent-based model we show how different levels of individual self-efficacy can evolve as a reaction to environmental demands and rewards to human intervention. The basic idea is that people learn how to best survive in their specific environment and teach this knowledge to their children. Because this cultural heritage only adapts very slowly to the current environment, people might have self-efficacy levels that better fit to the context of their ancestors than to their own. With empirical data from Ghana, we defind that different-levels of self-efficacy have developed from different historic environmental conditions and directly influence today´s household incomes, controlling for observable incentives and constraints. Specifically, the historic returns on agricultural investments are found to have shaped the cultural evolution of self-efficacy. In contrast, current returns on investment explain far less variation in self-efficacy. We find that this cultural trait significantly affects income levels through shaping the farmers’ investment behavior. Regarding the measurement of self-efficacy, we find self-efficacy to be a process- rather than a goal-oriented belief and it is mainly culturally transmitted.
    Keywords: Self-Efficacy; Economic Performance; Economic Development, Economic History, Cultural Evolution; Smallholder Farming
    JEL: D22 N57 O12 O13 O21 Q12
    Date: 2015–06
  13. By: Mario D. Tello (Departamento de Economía de la PUC del Perú)
    Abstract: This paper summarizes the theoretical literature of the connections between inequality, economic growth and structural change and presents evidence of these connections for a sample of twelve Latin American countries in period 1980-2011. This suggests that the low degree of structural change has caused a statistical impact on inequality and economic growth in only four and one countries respectively. Consequently, this result rejects the conjecture that structural change has been growth reducing in Latin America. The absence of a statistical causal relationship from structural change to economic growth may be because sectoral labor reallocation does not take into account informal activities. On the other hand, coverage of the causal effects of growth and/or inequality on structural change has been greater than the respective effects of structural change on inequality and/or economic growth. Seven Latin American countries experienced those causal effects. JEL Classification-JEL: O54, O12
    Keywords: Structural change, inequality, economic growth
    Date: 2015
  14. By: Naser, Hanan
    Abstract: This study uses Johansen cointegration technique to examine both the equilibrium relationship and the causality between oil consumption, nuclear energy consumption, oil price and economic growth. To do so, four industrialized countries including: the US, Canada, Japan, and France are investigated over the period from 1965 - 2010. The cointegration test results suggest that the proposed variables tend to move together in the long-run in all countries. In addition, the causal linkage between the variables is scrutinized through the exogeneity test. The results point that energy consumption (i.e., oil or nuclear) has either a predictive power for economic growth, or feedback impact with real GDP growth in all countries. The oil consumption is found to have a great effect on economy in all the investigated countries, especially in Canada. Also, exogenous test with respect to the speed of adjustment shows that oil consumption has a predictive power for real GDP in the US, Japan, and France. Regarding nuclear energy consumption - growth nexus, results illustrate that nuclear energy consumption has a predictive power for real economic growth in the US, Canada, and France. On the basis of speed of adjustment, it is concluded that there is bi-directional causality between oil consumption and economic growth in Canada. On the other hand, there is bidirectional causal relationship between nuclear energy consumption and real GDP growth in Japan.
    Keywords: Energy consumption, Economic growth, Nuclear energy, Oil consumption, Cointegration, Error correction model
    JEL: C3 C32 Q40 Q41 Q42
    Date: 2014–10–06
  15. By: El Alaoui, Aicha
    Abstract: This article investigates the relationship between export, import and economic growth using annual time series data for the Moroccan economy over the period 1980-2013. The cointegration technique has been employed to see the long run equilibrium relationship among variables. For this end, Granger causality test based on vector error correction model (VECM) has been adopted to see both short and long run causality among the variables. The cointegration results confirm the existence of the long-run relationship among these variables. For the short-run causality, the findings suggest (i) bidirectional causality between economic growth and import, (ii) unidirectional causality that run from export to import, and (iii) no-directional causality between economic growth and export.
    Keywords: Economic Growth, Export, Import, Granger Causality, Cointegration, VECM, Morocco
    JEL: C32 F41 O11
    Date: 2015–06

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