nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒07‒25
eleven papers chosen by
Marc Klemp
Brown University

  1. The Intergenerational Transmission of War By Filipe Campante; David Yanagizawa-Drott
  2. Innovation, Reallocation and Growth By William Kerr; Ufuk Akcigit; Nicholas Bloom; Daron Acemoglu
  3. The Dynamics of Inequality By Xavier Gabaix; Jean-Michel Lasry; Pierre-Louis Lions; Benjamin Moll
  4. Is Workforce Diversity Good for Efficiency? By Vincent Vandenberghe
  5. Democracy and economic growth: the role of intelligence in cross-country regressions By Salahodjaev, Raufhon
  6. Critical percentiles for equalizing growth By Laurence Roope
  7. Tenure, Experience, Human Capital and Wages: A Tractable Equilibrium Search Model of Wage Dynamics By Jesper Bagger; François Fontaine; Fabien Postel-Vinay; Jean-Marc Robin
  8. Growth and Trade with Frictions: A Structural Estimation Framework By James E. Anderson; Mario Larch; Yoto V. Yotov
  9. Productivity lessons for the Asian region By Jungsoo Park, Lawrence Lau
  10. A Note on Danish Living Standards through Historical Wage Series, 1731-1913 By Ekaterina Khaustova; Paul Sharp
  11. A note on social capital, space and growth in Europe By Luciano Lavecchia

  1. By: Filipe Campante; David Yanagizawa-Drott
    Abstract: We study whether war service by one generation affects service by the next generation in later wars, in the context of the major US theaters of the 20th century. To identify a causal effect, we exploit the fact that general suitability for service implies that how close to age 21 an individual’s father happened to be at a time of war is a key determinant of the father’s likelihood of participation. We find that a father’s war service experience has a positive and significant effect on his son’s likelihood of service. We estimate an intergenerational transmission parameter of approximately 0.1, across all wars, and that each individual war had a substantial impact on service in those that followed. We find evidence consistent with cultural transmission of war service from fathers to sons, and with the presence of substitutability between this direct transmission and oblique transmission (from society at large). In contrast, father’s war service increases sons’ educational achievement and actually reduces the likelihood of military service outside of wartime, suggesting that the results cannot be explained by material incentives or broader occupational choice. Taken together, our results indicate that a history of wars helps countries overcome the collective action problem of getting citizens to volunteer for war service.
    JEL: D74 D90 J12 J13 Z10
    Date: 2015–07
  2. By: William Kerr (Harvard University); Ufuk Akcigit (University of Pennsylvania); Nicholas Bloom (Stanford); Daron Acemoglu (Massachusetts Institute of Technology)
    Abstract: We build a model of firm-level innovation, productivity growth and reallocation featuring endogenous entry and exit. A key feature is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using detailed US Census micro data on firm-level output, R&D and patenting. The model provides a good fit to the dynamics of firm entry and exit, output and R&D, and its implied elasticities are in the ballpark of a range of micro estimates. We find industrial policy subsidizing either the R&D or the continued operation of incumbents reduces growth and welfare. For example, a subsidy to incumbent R&D equivalent to 5% of GDP reduces welfare by about 1.5% because it deters entry of new high-type firms. On the contrary, substantial improvements (of the order of 5% improvement in welfare) are possible if the continued operation of incumbents is taxed while at the same time R&D by incumbents and new entrants is subsidized. This is because of a strong selection effect: R&D resources (skilled labor) are inefficiently used by low-type incumbent firms. Subsidies to incumbents encourage the survival and expansion of these firms at the expense of potential high-type entrants. We show that optimal policy encourages the exit of low-type firms and supports R&D by high-type incumbents and entry.
    Date: 2015
  3. By: Xavier Gabaix; Jean-Michel Lasry; Pierre-Louis Lions; Benjamin Moll
    Abstract: The past forty years have seen a rapid rise in top income inequality in the United States. While there is a large number of existing theories of the Pareto tails of the income and wealth distributions at a given point in time, almost none of these address the fast rise in top inequality observed in the data. We show that standard theories, which build on a random growth mechanism, generate transition dynamics that are an order of magnitude too slow relative to those observed in the data. We then suggest parsimonious deviations from the basic model that can explain such changes, namely heterogeneity in mean growth rates or deviations from Gibrat's law. These deviations are consistent with theories in which the increase in top income inequality is driven by the rise of "superstar" entrepreneurs or managers.
    JEL: D31 E24
    Date: 2015–07
  4. By: Vincent Vandenberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: To answer the question of workforce diversity and efficiency, this paper departs from the approach used in most recent empirical papers exploiting firm-level evidence, where output is regressed on traditional inputs plus an index of diversity (Parrotta et al., 2012). We suggest addressing the question by adopting a more structural framework. The idea is to root the empirical strategy applied to firm-level data in the theoretical literature on population heterogeneity/stratification and growth (Bénabou, 1994). Essentially, what that literature suggests is that diversity is optimal when the technology displays concavity in the share of workers considered (e.g. decreasing marginal contribution of rising shares of more productive/skilled workers). What is also shown in this paper is that a production function à-la-Hellerstein-Neumark — where workforce diversity is captured via an index of labour shares — is suitable for estimating the concavity of the technology, and thus for assessing the case for/against workforce diversity. Finally, the paper contains an application of this Bénabou-Hellerstein-Neumark framework to two panels of Belgian firms covering the 1998-2012 period. The main result is that of an absence of strong evidence that age, gender or educational diversity is good or bad for efficiency.
    Keywords: efficiency, labour diversity, concavity
    JEL: J11 J14 J21
    Date: 2015–07–15
  5. By: Salahodjaev, Raufhon
    Abstract: Empirical literature has long conjectured that institutional arrangements, proxied by democracy, social capital and intelligence, are relevant determinants in cross-country differences in economic performance. Related literature, however, predominantly documents that democracy has either a negative or not significant impact on economic growth, while intelligence is assumed to have strong and direct effect on economic performance. We propose that that the effect of democratization is mediated by the degree of the approval to such policies, and that intelligence may alleviate or diminish the negative effect of weak institutions on economic growth. We empirically, investigate the interactive effect of democracy and intelligence on economic growth, using data from 93 nations, over the period 1970-2013. The results show that the relationship link between democracy and the real GDP growth varies with a nation’s level of cognitive abilities. The results remain robust to various estimation techniques, control variables and time periods.
    Keywords: intelligence, democracy, economic growth, IQ, cross-county
    JEL: I25 O43 O47
    Date: 2015–02–23
  6. By: Laurence Roope
    Abstract: This paper provides precise conditions under which incremental growth reduces inequality. Critical points are derived, above which incremental income increases inequality, and below which it decreases inequality. According to the Gini coefficient, the lower bound for this critical point is the median individual. Surprisingly, critical points associated with ‘absolute’ and ‘centrist’ measures of inequality are sometimes higher than those implied by ‘relative’ measures. The results are illustrated using data from UNU-WIDER’s World Income Inequality Database. According to the Gini, critical points are typically found to lie between the 62nd and 85th percentiles, in the least, and most, unequal countries, respectively.
    Keywords: growth; inequality; inequality measurement
    JEL: D31 D63 O40
    Date: 2015
  7. By: Jesper Bagger; François Fontaine (Bureau d'économie théorique et appliquée); Fabien Postel-Vinay (Departement d'Economie de Sciences Po); Jean-Marc Robin (Département d'économie)
    Abstract: We develop and estimate an equilibrium job search model of worker careers, allowing for human capital accumulation, employer heterogeneity and individual-level shocks. Wage growth is decomposed into contributions of human capital and job search, within and between jobs. Human capital accumulation is largest for highly educated workers. The contribution from job search to wage growth, both within- and between-job, declines over the first ten years of a career – the ‘job-shopping’ phase of a working life – after which workers settle into high-quality jobs using outside offers to generate gradual wage increases, thus reaping the benefits from competition between employers.
    Keywords: Human capital accumulation; Wage growth; Labor market competition
    JEL: J24 J31 J63 J64
    Date: 2014–06
  8. By: James E. Anderson; Mario Larch; Yoto V. Yotov
    Abstract: We build and estimate a structural dynamic general equilibrium model of growth and trade. Trade affects growth through changes in consumer and producer prices that in turn stimulate or impede physical capital accumulation. At the same time, growth affects trade, directly through changes in country size and indirectly through altering the incidence of trade costs. The model combines structural gravity with a capital accumulation specification of the transition between steady states. Theory translates into an intuitive econometric system that identifies the causal impact of trade on income and growth, and also delivers estimates of the key structural parameters in our model. Counterfactual experiments based on the estimated model give evidence for strong dynamic relationships between growth and trade, resulting in doubling of the static gains from trade liberalization.
    JEL: F10 F43 O40
    Date: 2015–07
  9. 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
  10. By: Ekaterina Khaustova (Russian State Social University (Kursk)); Paul Sharp (University of Southern Denmark)
    Abstract: This paper makes use of published information on wages and prices in Denmark to construct consistent real wage series for the years 1731 to 1913, which can be compared to other countries. Placing Denmark in a comparative perspective demonstrates that from being a relatively poor, backward economy in the eighteenth century, by the 1870s Copenhagen had one of the highest standards of living in Europe. Interestingly, this was before the introduction of stream-driven cooperative creameries, which leads us to speculate that high wages might have been an incentive to mechanize, as well as being a consequence of the later productivity increases in agriculture in particular.
    Keywords: Copenhagen, Denmark, prices, real wages!
    JEL: N33
    Date: 2015–07
  11. By: Luciano Lavecchia (Bank of Italy)
    Abstract: This note replicates the analysis of Tabellini (2010) on the relationship between social capital and regional economic growth in Europe, extending that work and the underlying dataset by focusing on the spatial dimension of social capital and introducing a definition of contiguity among European regions. We find a sizable and robust contribution of social capital to regional growth. We also estimate a Spatial autoregressive model with autoregressive disturbances (SARAR) and a Spatial Durbin Error model (SDEM). The results confirm the positive role of social capital, highlighting the importance of spatial spillovers, which warrants further discussion.
    Keywords: social capital, space, growth, Europe, sarar, sdem
    JEL: A13 O10 N13
    Date: 2015–07

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