nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒09‒11
thirteen papers chosen by
Marc Klemp
Brown University

  1. "Industrialization and the Fertility Decline" By Raphael Franck; Oded Galor
  2. The Growth Contribution of Colonial Indian Railways in Comparative Perspective By Dan Bogart; Latika Chaudhary; Alfonso Herranz-Loncan
  3. Stature and Sibship: Historical Evidence By Timothy J. Hatton
  4. The Permanent Effects of Transportation Revolutions in Poor Countries: Evidence from Africa By Remi Jedwab; Alexander Moradi
  5. Institutions and Growth: a GMM/IV Panel VAR Approach By Carlos Góes
  6. An Overlapping Generation Model of Labour Productivity and Economic Growth in Colombia By Fernando MESA PARRA
  7. Growth, Secular Stagnation and Wealth Preference By Yoshiyasu Ono
  8. Aid and growth. New evidence using an excludable instrument By Dreher, Axel; Langlotz, Sarah
  9. Income inequality, economic growth, and the effect of redistribution By Gründler, Klaus; Scheuermeyer, Philipp
  10. Endogenous economic growth, EROI, and transition towards renewable energy By Victor Court; Pierre-André Jouvet; Frédéric Lantz
  11. Human Capital-Economic Growth Nexus: A Causality Analysis for Pakistan By Khan, Jangraiz; Khattak, Naeem Ur Rehman Khattak; Khan, Amir
  12. Is Islamic Banking Good for Growth? By Patrick A. Imam; Kangni Kpodar
  13. Growth Anatomy of Croatian Economy By Cizmovic, Mirjana; Jankovic, Jelena; Popovic, Milenko

  1. By: Raphael Franck; Oded Galor
    Abstract: The research provides the first empirical examination of the hypothesized effect of industrialization on the fertility decline. Exploiting exogenous source of regional variations in the adoption of steam engines across France, the study establishes that industrialization was a major catalyst in the fertility decline in the course of the demographic transition. Moreover, the analysis further suggests that the contribution of industrialization to the decline in fertility plausibly operated through the effect of industrialization on human capital formation. Thus, the study confirms one of the central elements of Unified Growth Theory which hypothesizes that a critical force in the transition from stagnation to growth was by the impact of industrialization on the onset of the demographic transition, via the rise in the demand for human capital.
    Keywords: Economic Growth, Fertility Transition, Human Capital, Industrialization, Steam Engine.
    Date: 2015
  2. By: Dan Bogart; Latika Chaudhary; Alfonso Herranz-Loncan
    Abstract: It is widely recognized that railways were one of the most important drivers of economic growth in the 19th and 20th century, but it is less recognized that railways had a different impact across countries. In this paper, we first estimate the growth impact of Indian railways, one of the largest networks in the world circa 1900. Then, we show railways made a smaller contribution to income per-capita growth in India compared to the most dynamic Latin American economies between 1860 and 1912. The smaller contribution in India is related to four factors: (1) the smaller size of railway freight revenues in the Indian economy, (2) the higher elasticity of demand for freight services, (3) lower wages, and (4) higher fares. Our results suggest large disruptive technologies such as railways and other communication technologies can generate huge resources savings, but may not have large growth impacts.
    Keywords: Railways, Social Savings, ICT, India, Growth Accounting
    JEL: N7 O47 P52 R4
    Date: 2015–02
  3. By: Timothy J. Hatton
    Abstract: This paper examines historical evidence for a quality-quantity trade-off between sibship size and height as an indicator of health. The existing literature has focused more on education than on health and has it produced mixed results. Historical evidence is limited by the lack of household level data with which to link an individual’s height with his or her childhood circumstances. Nevertheless a few recent studies have shed light in this issue. Evidence for children in interwar Britain and for soldiers born in the 1890s who enlisted in the British army at the time of WW1 is reviewed in detail. Both studies support the idea of a significant trade-off, partly due to income dilution and partly because, in these settings, large families were a conduit for infection. Evidence from country-level time series is consistent with this view. The fertility decline that began in the late nineteenth century made a modest but nevertheless important contribution to the overall increase in heights during the following century.
    JEL: I12 I38 N24
    Date: 2015–05
  4. By: Remi Jedwab; Alexander Moradi
    Abstract: We exploit the construction and eventual demise of the colonial railroads in Africa to study the impact of transportation investments in poor countries. Using Ghana and Sub-Saharan Africa as a whole, we assembled new data on railroads and cities spanning over one century to show that: (i) Railroads had large effects on the spatial distribution and aggregate level of economic activity during the colonial period, as they constituted a transportation revolution in a context where no modern transportation technology previously existed. (ii) These effects have persisted to date, although railroads collapsed and road networks expanded considerably in the post-independence period. The analysis contributes to our understanding of the heterogeneous impact of transportation investments. It shows that initial investments may have a large effect in poor countries with basic infrastructure. As the countries develop, increasing returns may then solidify their spatial distribution, and subsequent investments may have a smaller effect on local economic development.
    Keywords: Transportation, Railroads, Development, Cities, Path Dependence, Roads
    JEL: O1 O3 O18 R4 R1 N97
    Date: 2015–01
  5. By: Carlos Góes
    Abstract: Both sides of the institutions and growth debate have resorted largely to microeconometric techniques in testing hypotheses. In this paper, I build a panel structural vector autoregression (SVAR) model for a short panel of 119 countries over 10 years and find support for the institutions hypothesis. Controlling for individual fixed effects, I find that exogenous shocks to a proxy for institutional quality have a positive and statistically significant effect on GDP per capita. On average, a 1 percent shock in institutional quality leads to a peak 1.7 percent increase in GDP per capita after six years. Results are robust to using a different proxy for institutional quality. There are different dynamics for advanced economies and developing countries. This suggests diminishing returns to institutional quality improvements.
    Keywords: Financial institutions;Development;Economic growth;Developed countries;Developing countries;Econometric models;Panel analysis;Institutions, Panel VAR, Economic Development, gdp, gdp per capita, results, Semiparametric and Nonparametric Methods, Models with Panel Data, Institutions and Growth, Economic Development.,
    Date: 2015–07–27
  6. By: Fernando MESA PARRA
    Abstract: This paper focuses on the decomposition of real wages in Colombia both by workers' ages and by cohorts, which overlap over time. The paper analyses how the Colombia's labour structure has undergone important changes in the period 1982-2007. This period has been characterized by a demographic transition that has tilted the balance from a relatively young population to an older one. The effects of capital accumulation have been estimated and modelled considering the presence of ever more sophisticated machinery, usually replacing less-skilled, younger workers, in relation to older and more qualified ones. In general real wages present a curved shape for each generation, as is acknowledged in the life-cycle hypothesis, according to which people generally start their working life with low incomes and rising debts and then obtain higher income and accumulate assets.
    Keywords: Demographic trends, Macroeconomic effects, Wage levels andstructure, Wage differential, Intergenerational income distribution.
    JEL: J11 J23 E24
    Date: 2015–05–20
  7. By: Yoshiyasu Ono
    Abstract: In 1960s-1980s Japan enjoyed high economic growth. In the early 1990s, however, the growth rate drastically declined and thereafter Japan has been suffering secular stagnation. This paper proposes a dynamic macroeconomic model that can consistently explain such a drastic change in economic performance. Wealth preference plays an important role. In the early stage consumption grows at the same pace as productivity increases. Once consumption reaches a certain level, however, it deviates from the full-employment level and aggregate demand deficiency appears. After that the economic growth rate asymptotically approaches zero even if productivity keeps on increasing, and secular stagnation arises.
    Date: 2015–09
  8. By: Dreher, Axel; Langlotz, Sarah
    Abstract: We use an excludable instrument to test the effect of foreign aid on economic growth in a sample of 96 recipient countries over the 1974-2009 period. We interact donor government fractionalization with a recipient country’s probability of receiving aid. The results show that fractionalization increases donors’ aid budgets, representing the over-time variation of our instrument, while the probability of receiving aid introduces variation across recipient countries. Controlling for country- and period-specific effects that capture the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Making use of the instrument, our results show no significant effect of aid on growth in the overall sample. We also investigate the effect of aid on consumption, savings, and investments, and split the sample according to the quality of economic policy, democracy, and the Cold War period. With the exception of the post-Cold War period (where abundant aid reduces growth), we find no significant effect of aid on growth in any of these sub-samples. None of the other outcomes are affected by aid.
    Keywords: aid effectiveness; economic growth; government fractionalization
    JEL: F35 F53 O11 O19
    Date: 2015–09
  9. By: Gründler, Klaus; Scheuermeyer, Philipp
    Abstract: Evidence from a current panel of harmonized worldwide data highlights a robust negative effect of income inequality on economic growth that we trace back to its transmission channels. Less equal societies tend to have less educated populations and higher fertility rates, but not necessarily lower investment shares. The first two effects are harmful for growth and reinforced by limited credit availability. Higher public spending on education attenuates the negative effects of inequality. In addition to the inequality-growth relationship, we examine the direct influence of effective redistribution. When net inequality is held constant, public redistribution negatively affects economic growth. Redistribution hampers investment and raises fertility rates. Combining the negative direct growth effect and the indirect positive effect operating through lower net inequality, the overall impact of redistribution is insignificant. Whereas this result stems mainly from advanced economies, redistribution is beneficial for growth in low and middle-income countries.
    Keywords: Economic Growth,Redistribution,Inequality,Panel Data
    JEL: O11 O15 O47 H23
    Date: 2015
  10. By: Victor Court; Pierre-André Jouvet; Frédéric Lantz
    Abstract: Due to their initial lack of emphasis on energy and natural resources, exogenous and endogenous growth models have suffered the same critic regarding the limits to economic growth imposed by finite Earth resources. Thus, various optimal control models that incorporate energy or natural resources have been developed during the last decades. However, in all these models the importance of the Energy Return On Energy Investment (EROI) has never been raised. The EROI is the ratio of the quantity of energy delivered by a given process to the quantity of energy consumed in this same process. Hence, the EROI is a measure of the accessibility of a resource, meaning that the higher the EROI the greater the amount of net energy delivered to society in order to support economic growth. The present article build a bridge upon the vacuum lying between the different literatures related to endogenous economic growth, the EROI and the necessary transition from nonrenewable to renewable energy. We provide an endogenous economic growth model subject to the physical limits of the real world (i.e. fossil and renewable energy production costs have functional forms that respect physical constraints). The model is able to reproduce (based on world data) an increasing reliance on fossil fuels from an early renewable era and the subsequent inevitable transition towards complete renewable energy that human will have to deal with in a not-too-far future. Through simulation we define the conditions for having a smooth transition from fossil to renewable energy and we study in which circumstances this transition can have negative impacts on economic growth (peak followed by a degrowth phase). In such cases, the implementation of a carbon tax can partially smooth this unfortunate dynamics depending on the ways of use of the carbon tax income.
    Keywords: Endogenous economic growth, net energy, EROI, energy transition.
    JEL: C6 O4 Q3 Q4
    Date: 2015
  11. By: Khan, Jangraiz; Khattak, Naeem Ur Rehman Khattak; Khan, Amir
    Abstract: This paper concentrates on the role of human capital in economic growth of Pakistan during the period 1971-2012.Granger Causality test has been used as analytical technique for this purpose. The study used research and development (R&D), education and health as proxies for human capital. The results confirm the role of human capital in the economic growth of the study area. The results show that human capital in form of research and development (R&D) Granger caused economic growth during the study period. Moreover, unidirectional causal relationships exist among different levels of education, physical capital, R&D and economic growth. Realizing the significance of human capital for sustained economic growth of the country, it is suggested to increase investment in R&D, health and education sector of Pakistan.
    Keywords: Causality, Human Capital, Research and Development, Physical Capital, Economic Growth
    JEL: E24 J2 J21 O32 O47 O49
    Date: 2015–04
  12. By: Patrick A. Imam; Kangni Kpodar
    Abstract: The rapid growth of Islamic banking has attracted much attention lately in the economic literature. At the same time, a mature body of the literature has shown that financial development is broadly conducive to economic growth, which raises the question as to whether a similar conclusion holds for Islamic banking. Against this backdrop, this paper investigates the relationship between Islamic banking development and economic growth in a sample of low and middle income countries, using data over the period 1990-2010. The results show that, notwithstanding its relatively small size compared to the economy and the overall size of the financial system, Islamic banking is positively associated with economic growth even after controlling for various determinants, including the level of financial depth. The results are robust across across different specifications, sample composition and time periods.
    Keywords: Financial sector;Econometric models;Economic growth;Low-income developing countries;Islamic banking;Time series;financial development, banks, banking, finance, bank, General,
    Date: 2015–04–28
  13. By: Cizmovic, Mirjana; Jankovic, Jelena; Popovic, Milenko
    Abstract: In this paper presented is research on anatomy of growth of Croatian economy in the period 1990-2013. Results of this analysis basically should be understood as a kind of growth diagnostic of Croatian economy. Conventional sources of growth analysis, which measure contribution of different factors of production, is given for growth of GDP and per capita GDP in relevant sub-periods. To get deeper understanding of results provided in this way, authors continue with analysis of sectorial side sources of growth. Further insights are provided by demand side sources of growth. Particular attention is, in that respect, devoted to analysis of net-export, capital formation and final consumption. Brief notions on institutional and other fundamental causes of growth are given as well. Policy recommendations for overcoming existing deadlock and acceleration of economic growth are only briefly discussed in concluding section of the paper.
    Keywords: Sources of growth, TFP, Sectoral structure, Expenditure structure
    JEL: O11 O40 O41
    Date: 2015–09–01

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