nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒08‒13
fifteen papers chosen by
Marc Klemp
Brown University

  1. Cereals, Appropriability and Hierarchy By Mayshar, Joram; Moav, Omer; Neeman, Zvika; Pascali, Luigi
  2. Land Access Inequality and Education in Pre-Industrial Spain By Julio Martinez-Galarraga;Francisco Beltrán Tapia
  3. Genetic distance and international migrant selection By Krieger, Tim; Renner, Laura; Ruhose, Jens
  4. People and Machines: A Look at the Evolving Relationship Between Capital and Skill in Manufacturing 1860-1930 Using Immigration Shocks By Lafortune, Jeanne; Tessada, José; Lewis, Ethan Gatewood
  5. Geography and Demography: New Economic Geography with Endogenous Fertility By Hiroshi Goto; Keiya Minamimura
  6. The Contribution of Female Health to Economic Development By David E. Bloom; Michael Kuhn; Klaus Prettner
  7. Population Density, Fertility, and Childcare Services from the Perspective of a Two-Region Overlapping Generations Model By ISHIDA Ryo; OGURO Kazumasa; YASUOKA Masaya
  8. Innovation, industrial dynamics and economic growth By Stadler, Manfred
  9. Pensions, Education, and Growth: A Positive Analysis By Tetsuo Ono; Yuki Uchida
  10. Progressive Taxation as an Automatic Destabilizer under Endogenous Growth By Jang-Ting Guo; Shu-Hua Chen
  11. Primary Education Expansion and Quality of Schooling: Evidence from Tanzania By Valente, Christine
  12. Catching Up: Developing Countries in Pursuit of Growth By Popov, Vladimir
  13. Technological Progress, Investment Frictions and Business Cycle: New Insights from a Neoclassical Growth Model By Michael Donadelli; Vahid Mojtahed; Antonio Paradiso
  14. The relative effectiveness of Monetary and Fiscal Policies on growth: what does long-run SVAR model tell us? By Şen, Hüseyin; Kaya, Ayşe
  15. Schumpeterian business cycles By Filip Rozsypal

  1. By: Mayshar, Joram; Moav, Omer; Neeman, Zvika; Pascali, Luigi
    Abstract: We propose that the development of social hierarchy following the Neolithic Revolution was an outcome of the ability of the emergent elite to appropriate cereal crops from farmers and not a result of land productivity, as argued by conventional theory. We argue that cereals are easier to appropriate than roots and tubers, and that regional differences in the suitability of land for different crops explain therefore differences in the formation of hierarchy and states. A simple model illustrates our main theoretical argument. Our empirical investigation shows that land suitability for cereals relative to suitability for tubers explains the formation of hierarchical institutions and states, whereas land productivity does not.
    Keywords: geography; hierarchy; institutions; state capacity
    JEL: D02 D82 H10 O43
    Date: 2015–07
  2. By: Julio Martinez-Galarraga;Francisco Beltrán Tapia
    Abstract: By collecting a large dataset in mid-19th century Spain, this paper contributes to the debate on institutions and economic development by examining the historical link between land access inequality and education. This paper analyses information from the 464 districts existent in 1860 and confirms that there is a negative relationship between the fraction of farm labourers and literacy rates. This result does not disappear when a large set of potential confounding factors are included in the analysis. The use of the Reconquest as a quasi-natural experiment allows us to rule out further concerns about potential endogeneity. Likewise, by employing data on schooling enrolment rates and number of teachers, this paper explores the mechanisms behind the observed relationship in order to ascertain to which extent demand or supply factors are responsible for it. Lastly, the gender composition of the data, which enables distinguishing between female and male literacy levels, together with boys and girls schooling enrolment rates, is also examined.
    Keywords: economic history, inequality, land access inequality, education inequality, Spain, Pre-Industrial Spain
    Date: 2015–06–01
  3. By: Krieger, Tim; Renner, Laura; Ruhose, Jens
    Abstract: This paper looks at the effect of the relatedness of two countries, measured by their genetic distance, on educational migrant selection. We analyze bilateral country-level education-specific migration stocks from 85 sending countries to the 15 main destination countries in 2000 and show that country pairs with larger genetic distances exhibit more selected migrant stocks compared to country pairs with smaller genetic distances on average. The effect is driven by country pairs with genetic distances above the median, suggesting that genetic distance must be sufficiently large to constitute a barrier to migration for low-skilled migrants. Results are robust to the inclusion of sending and destination country fixed effects, bilateral control variables, and an instrumental variables approach that exploits exogenous variation in genetic distances in the year 1500.
    Keywords: Genetic Distance,International Migration,Selection,Culture
    JEL: F22 J61 Z1
    Date: 2015
  4. By: Lafortune, Jeanne (Pontificia Universidad Catolica de Chile); Tessada, José (Pontificia Universidad Catolica de Chile); Lewis, Ethan Gatewood (Dartmouth College)
    Abstract: This paper estimates the elasticity of substitution between capital and skill using variation across U.S. counties in immigration-induced skill-mix changes between 1860 and 1930. We find that capital began as a q-complement for skilled and unskilled workers, and then dramatically increased its relative complementary with skilled workers around 1890. Simulations of a parametric production function calibrated to our estimates imply the level of capital-skill complementarity after 1890 likely allowed the U.S. economy to absorb the large wave of less-skilled immigration with a modest decline in less-skilled relative wages. This would not have been possible under the older production technology.
    Keywords: immigration, capital-skill complementarity, skill-biased technical change, manufacturing, Second Industrial Revolution
    JEL: J24 N61 O33
    Date: 2015–07
  5. By: Hiroshi Goto (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Keiya Minamimura (Graduate School of Economics, Kobe University)
    Abstract: To explain the links between population distribution and economic integration, we construct a spatial economics model with endogenous fertility. A higher population concentration increases real wages and child-raising costs, thus lowering the fertility rate. However, people migrate to more populated regions to obtain higher real wages. We show that mobility across regions results in more people flowing into highly populated regions, but lowers fertility rates there. The population growth path resembles a logistic curve in the early phase, but population decreases in the last phase. Additionally, economic integration leads to population concentration and decreases population size in the whole economy.
    Keywords: Population change, Agglomeration, Migration, Trade, Economic integration
    JEL: F15 R12 R23
  6. By: David E. Bloom; Michael Kuhn; Klaus Prettner
    Abstract: We analyze the economic consequences for less developed countries of investing in female health. In so doing we introduce a novel micro-founded dynamic general equilibrium framework in which parents trade off the number of children against investments in their education and in which we allow for health-related gender differences in productivity. We show that better female health speeds up the demographic transition and thereby the take-off toward sustained economic growth. By contrast, male health improvements delay the transition and the take-off because ceteris paribus they raise fertility. According to our results, investing in female health is therefore an important lever for development policies. However, and without having to assume anti-female bias, we also show that households prefer male health improvements over female health improvements because they imply a larger static utility gain. This highlights the existence of a dynamic trade-off between the short-run interests of households and long-run development goals. Our numerical analysis shows that even small changes in female health can have a strong impact on the transition process to a higher income level in the long run. Our results are robust with regard to a number of extensions, most notably endogenous investment in health care.
    JEL: O1
    Date: 2015–07
  7. By: ISHIDA Ryo; OGURO Kazumasa; YASUOKA Masaya
    Abstract: In countries confronting the issue of low fertility such as Japan, 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 the 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 a 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.
    Date: 2015–07
  8. By: Stadler, Manfred
    Abstract: We present a class of dynamic general-equilibrium models of education, innovation and technology transfer to explain the evolution of industries and aggregate growth in closed and open economies. Firms employ educated workers in order to develop higher-quality products. The realization of quality innovations becomes more difficult as the quality level increases but this deterioration of technological opportunities is compensated by an improvement of the researchers' capabilities. Innovation and human-capital accumulation appear as in-line engines of scale-invariant endogenous growth. Industries evolve according to stochastic processes of innovation, imitation and technology adaption in the global economy.
    Keywords: education,innovation,industrial dynamics,technology transfer,international trade,economic growth
    JEL: F43 O31 O33 O34
    Date: 2015
  9. By: Tetsuo Ono (Graduate School of Economics, Osaka University); Yuki Uchida (Graduate School of Economics, Osaka University)
    Abstract: This study presents an overlapping generations model to capture the nature of the competition between generations regarding two redistribution policies, public education and public pensions. From a political economy viewpoint, we investigate the effects of population aging on these policies and economic growth. We show that greater longevity results in a higher pension-to-GDP ratio. However, an increase in longevity produces an initial increase followed by a decrease in the public education- to-GDP ratio. This, in turn, results in a hump-shaped pattern of the growth rate.
    Keywords: economic growth; population aging; public education; public pen-sions
    JEL: D78 E24 H55
    Date: 2014–12
  10. By: Jang-Ting Guo (Department of Economics, University of California Riverside); Shu-Hua Chen (National Taipei University)
    Abstract: It has been shown that in an otherwise standard one-sector real business cycle model with an indeterminate steady state under laissez faire, sufficiently progressive income taxation may stabilize the economy against aggregate fluctuations caused by agents' animal spirits. We show that this previous finding can be overturned within an identical model which allows for sustained endogenous growth. Specifically, progressive taxation may operate like an automatic destabilizer that leads to equilibrium indeterminacy and sunspot-driven cyclical fluctuations in an endogenously growing macroeconomy. This instability result is obtained under two tractable progressive tax policy formulations that have been considered in the existing literature.
    Keywords: Progressive Income Taxation, Automatic Stabilizer, Equilibrium Indeterminacy, Endogenous Growth.
    JEL: E62 O41
    Date: 2015–07
  11. By: Valente, Christine (University of Bristol)
    Abstract: The rapid increase in primary enrollment seen in many developing countries might worsen schooling quality. I estimate the effect of enrollment growth following the removal of primary school fees in Tanzania and find that it led to large increases in the pupil-teacher ratio and a reduction in observable teacher quality, but rule out a substantial effect on test scores overall. These results are robust to instrumenting enrollment growth using predetermined fertility and migration decisions, and not driven by compositional changes. In urban areas, however, where baseline achievement was higher, test scores deteriorated where enrollment growth was larger.
    Keywords: universal primary education, pupil-teacher ratio, test scores, Tanzania
    JEL: I21 I28 O15
    Date: 2015–07
  12. By: Popov, Vladimir
    Abstract: This paper examines the trajectory of growth in the Global South. Before the 1500s all countries were roughly at the same level of development, but from the 1500s Western countries started to grow faster than the rest of the world and PPP GDP per capita by 1950 in the US, the richest Western nation, was nearly 5 times higher than the world average. Since 1950 this ratio stabilized – not only Western Europe and Japan improved their relative standing in per capita income versus the US, but also East Asia, South Asia and some developing countries in other regions started to bridge the gap with the West. After nearly half of millennium of growing economic divergence, the world seems to have entered the era of convergence. The factors behind these trends are analyzed; implications for the future and scenarios are considered.
    Keywords: convergence, divergence, gap in per capita income between the West and the South, economic growth, institutional capacity of the state
    JEL: N00 O1 O40 O43 O47
    Date: 2015–07–31
  13. By: Michael Donadelli; Vahid Mojtahed; Antonio Paradiso
    Abstract: This paper examines whether there is direct link between investment frictions and technological progress. An augmented version of a standard stochastic Solow model is presented. In this novel version the TFP is a function of a set of “ad hoc” variables in deviation from their equilibrium trend: (i) relative price of investment goods with respect to consumption goods (i.e. investment frictions); (ii) human capital index and (iii) trade openness. Empirical results show that investment frictions have an important role in influencing productivity growth. This finding may help in solving an important puzzle raised by the recent business cycle accounting literature, which points out that frictions have a marginal role in driving business cycles. The continuous fluctuations around the long-run trend of exogenous variables entering as driving forces in the technological progress implies that productivity shocks are state dependent. In other words, the true effect on the stock of knowledge and output depends on the exogenous variables’ cyclical phase. This provides novel, realistic and country-specific policy implications.
    Keywords: technological progress, macroeconomic fluctuations, investment frictions, trade openness, education
    JEL: E32 C32 O47
    Date: 2015
  14. By: Şen, Hüseyin; Kaya, Ayşe
    Abstract: This paper studies empirically the relative effectiveness of monetary and fiscal policies on growth. Unlike many previous papers which have focused, to a large extent, on the effect of monetary or fiscal policies separately, this paper considers the comparative efficacy of the two policies on growth by applying the Structural Vector Autoregression (SVAR) model to the quarterly data for Turkey over the period 2001:Q1-2014:Q2. The empirical findings of this paper show that both monetary and fiscal policies do have significant effects on growth. However, monetary policy is more effective than fiscal policy in stimulating growth. More specifically, interest rate ―a monetary policy variable― is the most potent instrument in affecting growth. Then budget deficit ―a fiscal policy variable― becomes the second important variable after interest rate. These findings suggest that although the relative effectiveness in boosting growth is different, both policies significantly affect growth, suggesting that they should be used jointly but in an efficient manner.
    Keywords: Monetary Policy, Fiscal Policy, Growth, Macroeconomic Policy Management, SVAR, Turkey.
    JEL: E52 E58 E62 E63
    Date: 2015–07–31
  15. By: Filip Rozsypal (University of Cambridge)
    Abstract: This paper presents an economy where business cycles and long term growth are both endogenously generated by the same type of iid shocks. I embed a multi-sector real business cycle model into an endogenous growth framework where innovating firms replace incumbent production firms. The only source of uncertainty is the imperfectly observed quality of innovation projects. As long as the goods are complements, a successful innovation in one sector increases demand for the output of other sectors. Higher profits motivate higher innovation efforts in the other sectors. The increase in productivity in one sector is thus followed by increases in productivity in the other sectors and the initial innovation generates persistent movement in aggregate productivity.
    Date: 2015

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