nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒09‒05
fourteen papers chosen by
Marc Klemp
Brown University

  1. Islam, Inequality and Pre-Industrial Comparative Development By Stelios Michalopoulos; Alireza Naghavi; Giovanni Prarolo
  2. The Contribution of Female Health to Economic Development By Bloom, David E.; Kuhn, Michael; Prettner, Klaus
  3. The Political Legacy of American Slavery By Acharya, Avidit; Blackwell, Matthew; Sen, Maya
  4. A Theory of Intergenerational Mobility By Becker, Gary; Kominers, Scott Duke; Murphy, Kevin M.; Spenkuch, Jörg L.
  5. Intelligence and gender (in)equality: empirical evidence from developing countries By Salahodjaev, Raufhon; Azam, Sardor
  6. The Behavior of Other as a Reference Point By Francesco Bogliacino; Pietro Ortoleva
  7. Economic growth, inequality and efficiency By Sona Stikarova
  8. Ethnic Inequality: Theory and Evidence from Formal Education in Nigeria By Dev, Pritha; Mberu, Blessing; Pongou, Roland
  9. Do Resource Windfalls Improve the Standard of Living in Sub-Saharan African Countries?: Evidence from a Panel of Countries By Munseob Lee; Cheikh A. Gueye
  10. Trillions Gained and Lost: Estimating the Magnitude of Growth Episodes By Pritchett, Lant; Sen, Kunal; Kar, Sabyasachi; Raihan, Selim
  11. Fertility, Official Pension Age, and PAYG Pensions By Chen, Hung-Ju
  12. Local Foods and Rural Economic Growth By Deller, Steven C.; Brown, Laura; Haines, Anna; Fortenbery, Randy
  13. Productivity and technical change according to Salter – A note By Amavilah, Voxi Heinrich
  14. Why is GDP growth linear? By J\"org D. Becker

  1. By: Stelios Michalopoulos; Alireza Naghavi; Giovanni Prarolo
    Abstract: This study explores the interaction between trade and geography in shaping the Islamic economic doctrine. We build a model where an unequal distribution of land quality in presence of trade opportunities conferred differential gains from trade across regions, fostering predatory behavior by groups residing in the poorly endowed territories. We show that in such an environment it was mutually beneficial to institute an economic system of income redistribution featuring income transfers in return for safe passage to conduct trade. A commitment problem, however, rendered a merely static redistribution scheme unsustainable. Islam developed a set of dynamic redistributive rules that were self-enforcing, in regions where arid lands dominated the landscape. While such principles fostered the expansion of trade within the Muslim world they limited the accumulation of wealth by the commercial elite, shaping the economic trajectory of Islamic lands in the pre-industrial era.
    JEL: F10 O1 Z0 Z12
    Date: 2015–08
  2. By: Bloom, David E. (Harvard University); Kuhn, Michael (Vienna Institute of Demography); Prettner, Klaus (Vienna University of Technology)
    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.
    Keywords: economic development, educational transition, female health, fertility transition, quality-quantity trade-off
    JEL: O11 I15 I25 J13 J16
    Date: 2015–08
  3. By: Acharya, Avidit (Stanford University); Blackwell, Matthew (Harvard University); Sen, Maya (Harvard University)
    Abstract: We show that contemporary differences in political attitudes across counties in the American South trace their origins to slavery's prevalence more than 150 years ago. Whites who currently live in Southern counties that had high shares of slaves in 1860 are more likely to identify as a Republican, oppose affirmative action policies, and express racial resentment and colder feelings toward blacks. These results cannot be explained by existing theories, including the theory of racial threat. To explain these results, we offer evidence for a new theory involving the historical persistence of racial attitudes. We argue that, following the Civil War, Southern whites faced political and economic incentives to reinforce racist norms and institutions. This produced racially conservative political attitudes, which in turn have been passed down locally across generations. Our results challenge the interpretation of a vast literature on racial attitudes in the American South.
    JEL: N32 N91 O17
    Date: 2014–12
  4. By: Becker, Gary; Kominers, Scott Duke; Murphy, Kevin M.; Spenkuch, Jörg L.
    Abstract: We develop a model of intergenerational resource transmission that emphasizes the link between cross-sectional inequality and intergenerational mobility. By drawing on first principles of human capital theory, we derive several novel results. In particular, we show that, even in a world with perfect capital markets and without differences in innate ability, wealthy parents invest, on average, more in their offspring than poorer ones. As a result, persistence of economic status is higher at the top of the income distribution than in the middle. Successive generations of the same family may even cease to regress towards the mean. Moreover, we demonstrate that government interventions intended to ameliorate inequality may in fact lower intergenerational mobility—even when they do not directly favor the rich. Lastly, we consider how mobility is affected by changes in the marketplace.
    Keywords: intergenerational mobility; human capital; inequality;
    JEL: D1 D10 D31 J0
    Date: 2015–08
  5. By: Salahodjaev, Raufhon; Azam, Sardor
    Abstract: This paper makes an attempt to explore whether intelligence of nations is related to gender inequality, measured by Social Institutions and Gender Index (SIGI), in developing countries. Related literature robustly links intelligence to economic development, poverty, quality of institutions and informal economic activity. Controlling for conventional antecedents of gender inequality (i.e. religion, political regime, legal origins and trade openness), this paper finds that, on average, a 10-point increase in national IQ scores in the developing world is associated with an 8.2 point reduction in SIGI, ceteris paribus. To test the robustness of our findings we apply instrumental variables (IV) and robust regression methods. We also test whether our results are sensitive to the choice of control variables and heterogeneity of nations in our sample. The negative association of intelligence with gender inequality remains statistically significant and intact in all cases.
    Keywords: intelligence; IQ; gender equality; cross-country; SIGI; developing countries
    JEL: F0 J7
    Date: 2015–08–24
  6. By: Francesco Bogliacino; Pietro Ortoleva
    Abstract: We use prospect theory to model reference dependent consumers, where the reference point is the average behavior of the society in the current period. We show that after a finite number of steps under any equilibrium, the distribution of wealth will become and remain equal, or admit a missing class (a particular form of polarization). Under equilibria that admit the highest growth rates, the initial wealth distribution that maximizes this growth rate is one of perfect equality. Conversely, under equilibria that admit the lowest growth rates, perfect equality minimizes this growth rate and societies with a small level of initial inequality grow the fastest. In addition growth rates in corresponding economics without reference dependent consumers admit lower growth rates.
    Keywords: Prospect Theory, Reference-dependence, Aspirations
    JEL: D11 D91
    Date: 2015–08–25
  7. By: Sona Stikarova (University of Economics in Bratislava, Faculty of National Economy, Department of Economic Policy)
    Abstract: Over the last decades, theoretical work has come up with a significant amount of concepts how the income inequality and economic growth may affect each other. The recent literature identifies many channels through inequality may have positive, negative or even both effects on economic performance, but in different time dimensions. The relationship has been researched from the both perspective: the impact of income inequality on economic growth, and how the economic growth and efficiency are related to income inequality. Despite of the amount of theoretical and empirical work, the relationship between efficiency and equality is far from being well understood.
    Keywords: income inequality, efficiency, growth
    JEL: E60 O10
    Date: 2014–09–17
  8. By: Dev, Pritha; Mberu, Blessing; Pongou, Roland
    Abstract: We study the causes of inequality in human capital accumulation across ethnic and religious groups. An overlapping generations model in which agents decide how much time to invest in human capital versus ethnic capital shows that the demand for human capital is affected positively by parental and group's older cohort human capital, and negatively by group size. Two ex-ante identical groups may diverge in human capital accumulation, with the divergence mostly occurring among their low-ability members. Furthermore, group and ethnic fragmentation increases the demand for human capital. We validate these predictions using household data from Nigeria where ethnicity and religion are the primary identity cleavages. We document persistent ethnic and religious inequality in educational attainment. Members of ethnic groups that historically converted to Christianity outperform those whose ancestors converted to Islam. Consistent with theory, there is little difference between the high-ability members of these groups, but low-ability members of historically Muslim groups choose Koranic education as an alternative to formal education, even when formal education is free. Moreover, more religiously fragmented ethnic groups fare better, and local ethnic fragmentation increases the demand for formal education. Our analysis sheds light on the political context that underlines the recent violent opposition to "western education" in the country.
    Keywords: Group Inequality, Human Capital, Ethnic Capital, Ethnic Politics, Koranic Education
    JEL: A13 C0 D4 D5 D9 I2 I21 I24 J0 N3 O1
    Date: 2015–08–20
  9. By: Munseob Lee; Cheikh A. Gueye
    Abstract: We examine the impact of resource windfall on the standard of living both in the short-run and long-run, using a sample of 130 countries, 1963-2007. Then, we systematically investigate the effect of resource windfall on welfare in three different groups of countries: We find that in the short-run resource windfall is welfare enhancing in the whole sample, especially via increases in income and decreases in inequality. However, in SSA countries, the size of welfare improvement is small and it is smaller and almost zero after one year in fragile Sub-Saharan African (SSA) countries. In the whole sample, a resource windfall shock leads to significant welfare growth even in the long-run, but we couldn’t find any significant long-run effect of resource windfall in SSA countries.
    Keywords: Equatorial Guinea;Eritrea;Ethiopia;Cameroon;Burundi;Burkina Faso;Botswana;Benin;Africa;Angola;Djibouti;Commodity boom;Commodity prices;Comoros;Congo, Republic of;Congo, Democratic Republic of the;Chad;Central African Republic;Cross country analysis;Corruption;Guinea-Bissau;Guinea;Governance;Income;Inclusive growth;Gambia, The;Gabon;Ghana;Mauritania;Mali;Mauritius;Nigeria;Niger;Mozambique;Namibia;Natural resources;Lesotho;Liberia;Malawi;Madagascar;Kenya;Panel analysis;Rwanda;Rent;Sierra Leone;Senegal;Seychelles;South Africa;Uganda;Togo;Sub-Saharan Africa;Swaziland;Sudan;Tanzania;Zimbabwe;Zambia;Welfare;gdp, development, Models with Panel Data, General, Macroeconomic Analyses of Economic Development, Exhaustible Resources and Economic Development, Resource Booms, Government Policy,
    Date: 2015–04–28
  10. By: Pritchett, Lant (Center for Global Development, Washington, DC and Harvard University); Sen, Kunal (University of Manchester and); Kar, Sabyasachi (Institute of Economic Growth, Delhi); Raihan, Selim (University of Dhaka)
    Abstract: We propose and implement a new technique for measuring the total magnitude of a growth episode: the change in output per capita resulting from one structural break in the trend growth of output (acceleration or deceleration) to the next. The magnitude of the gain or loss from a growth episode combines (a) the difference between the post-break growth rate versus a counter-factual "no break" growth rate and (b) the duration of the episode to estimate the difference in output per capita at the end of an episode relative to what it would have been in the "no break" scenario. We use three "counter-factual" growth rates that allow for differing degrees of regression to global average growth: "no change" (zero regression to the mean), "world episode average" (full regression to the mean) and "unconditional predicted growth" (which uses a regression for each growth episode to predict future growth based only on past growth and episode initial level). We can also calculate the net present value at the start of an episode of the gain or loss in output comparing the actual evolution of output per capita versus a counter-factual. This method allows us to place dollar figures on growth episodes. The top 20 growth accelerations have Net Present Value (NPV) magnitude of 30 trillion dollars--twice US GDP. Conversely, the collapse in output in Iran between 1976 and 1988 produced an NPV loss of $143,000 per person. The top 20 growth decelerations account for 35 trillion less in NPV of output. Paraphrasing Lucas, once one begins to think about what determines growth events that cause the appearance or disappearance of output value equal to the total US economy, it is hard to think about anything else.
    JEL: C18 O11 O47
    Date: 2014–03
  11. By: Chen, Hung-Ju
    Abstract: This paper examines the effect of fertility and official pension age on long-run pay-as-you-go (PAYG) pensions based on an overlapping generations model. We find that increasing the fertility rate or official pension age does not necessarily raise pensions. When the output elasticity of capital is low, an increase in the fertility rate or official pension age may raise pensions, but such a change reduces pensions if the output elasticity of capital and the tax rate are high.
    Keywords: Fertility; Official pension age; OLG, PAYG pensions.
    JEL: H55 J13 J26
    Date: 2015–09–03
  12. By: Deller, Steven C. (University of WI); Brown, Laura (University of WI); Haines, Anna (University of WI); Fortenbery, Randy (WA State University)
    Abstract: In this paper we explore the impact of local foods on economic growth using a Barro-type framework. We address model uncertainty by using a Spatial Bayesian Model Averaging (SMBA) approach and check for robustness of results on local foods by employing several metrics of local foods. Results suggest that higher levels of local foods weakly lead to lower levels of income growth. The results are not robust implying that our thinking about how to define and quantify local foods needs further attention.
    Date: 2014–02
  13. By: Amavilah, Voxi Heinrich
    Abstract: Salter’s simple and clear explanation of productivity and how it relates to technical change has anchored many elaborate and fancy growth and change analyses. Unfortunately many of these elaborations do not even reference Salter. They should. This note shows that some old ideas are like wine which gets better with age.
    Keywords: Salter and productivity; Salter and technical change; productivity and technical change
    JEL: O3 O4
    Date: 2015–07–15
  14. By: J\"org D. Becker (Institut f\"ur Cybernetische Anthropologie Starnberg)
    Abstract: In many European countries the growth of the real GDP per capita has been linear since 1950. An explanation for this linearity is still missing. We propose that in artificial intelligence we may find models for a linear growth of performance. We also discuss possible consequences of the fact that in systems with linear growth the percentage growth goes to zero.
    Date: 2015–08

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