nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒09‒18
eighteen papers chosen by
Marc Klemp
Brown University

  1. "Roots of Autocracy" By Oded Galor; Marc Klemp
  2. Cereals, Appropriability and Hierarchy By Mayshary, Joram; Moav, Omer; Neeman, Zvika; Pascali, Luigi
  3. The long shadow of history: Roman legacy and economic development - evidence from the German limes By Wahl, Fabian
  4. Pre-industrial population and economic growth: Was there a Malthusian mechanism in Sweden? By Edvinsson, Rodney
  5. Are We Approaching an Economic Singularity? Information Technology and the Future of Economic Growth By William D. Nordhaus
  6. Growing incomes, growing people in nineteenth-century Tasmania By Kris Inwood; Hamish Maxwell-Stewart; Deb Oxley
  7. Innovation and growth with financial, and other, frictions By Chiu, Jonathan; Meh, Cesaire; Wright, Randall
  8. Growth, Unemployment, and Fiscal Policy: A Political Economy Analysis By Tetsuo Ono
  9. Econometric Based Modeling of Population Growth under Socio-cultual Constraints By Marcel Ausloos; Giulia Rotundo; Claudiu Herteliu; Bogdan Vasile Ileanu
  10. Economic Growth and the Politics of Intergenerational Redistribution By Tetsuo Ono
  11. On the Effect of State fragility on Corruption By Asongu, Simplice
  12. Does Intelligence Affect Economic Diversification? By Kodila-Tedika, Oasis; Asongu, Simplice A
  13. Banking and Industrialization By Stephan Heblich; Alex Trew
  14. The impact of foreign aid on economic growth By Martinez, Pablo
  15. Revisiting the Effect of FDI on Economic Growth using Quantile Regression By Lijuan Huo; Tae-Hwan Kim; Yunmi Kim
  16. Gender Equality and Economic Growth in India: A Quantitative Framework By Pierre-Richard Agénor; Jan Mares; Piritta Sorsa
  17. Parameter Learning in General Equilibrium: The Asset Pricing Implications By Michael Johannes; Lars Lochstoer; Pierre Collin-Dufresne
  18. Is Growth Declining in the Service Economy? By SASAKI, Hiroaki

  1. By: Oded Galor; Marc Klemp
    Abstract: This research explores the origins of the variation in the prevalence and nature of political institutions across globe. It advances the hypothesis and establishes empirically that variation in the inherent diversity across human societies, as determined in the course of the exodus of Homo sapiens from Africa tens of thousands of years ago, shaped the nature of political institutions across regions and societies. The study establishes that, while human diversity has amplified the beneficial e?ects of institutions, mitigating the adverse e?ects of non-cohesiveness, its simultaneous contribution to heterogeneity in cognitive and physical traits has fostered the scope for domination, leading to the formation and persistence of autocratic institutions. A larger degree of human diversity within societies diminished cohesiveness and therefore stimulated the emergence of institutions that have mitigated the adverse e?ects of non-cohesiveness on productivity. However, the dual impact of human diversity on the emergence of inequality and class stratification have diverted the nature of the emerging institutions towards extractive, autocratic ones. Developing a novel geo-referenced dataset of genetic diversity and ethnographic characteristics among ethnic groups across the globe, the analysis establishes that genetic diversity contributed to the emergence of autocratic pre-colonial institutions. Moreover, the findings suggest that the contribution of diversity to these pre-colonial autocratic institutions has plausibly operated through its dual e?ect on the formation of institutions and class stratification. Furthermore, reflecting the persistence of institutional, cultural, and genetic characteristics, the spatial distribution of genetic diversity across the globe has contributed to the contemporary variation in the degree of autocracy across countries.
    Keywords: Autocracy, Economic Growth, Genetic Diversity, Institutions, Out-of-Africa Hypothesis of Comparative Development
    Date: 2015
  2. By: Mayshary, Joram (Department of Economics, Hebrew University of Jerusalem); Moav, Omer (Department of Economics University of Warwick, School of Economics Interdisciplinary Center (IDC) Herzliya,); Neeman, Zvika (Eitan Berglas School of Economics, Tel-Aviv University,); Pascali, Luigi (Pompeu Fabra University, University of Warwick and CAGE)
    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
    Date: 2015
  3. By: Wahl, Fabian
    Abstract: This paper contributes to the understanding of the long-run consequences of Roman rule on economic development. In ancient times, the area of contemporary Germany was divided into a Roman and non-Roman part. The study uses this division to test whether the formerly Roman part of Germany show a higher nightlight luminosity than the non-Roman part. This is done by using the Limes wall as geographical discontinuity in a regression discontinuity design framework. The results indicate that economic development - as measured by luminosity - is indeed significantly and robustly larger in the formerly Roman parts of Germany. The study identifies the persistence of the Roman road network until the present as an important factor causing this development advantage of the formerly Roman part of Germany both by fostering city growth and by allowing for a denser road network.
    Keywords: Roman Empire,Economic Development,Germany,Boundary Discontinuity,Transport Infrastructure,Persistence
    JEL: N13 N73 O18 R12 R40
    Date: 2015
  4. By: Edvinsson, Rodney (Dept. of Economic History, Stockholm University)
    Abstract: This study examines whether there was a Malthusian equilibrium mechanism in Sweden 1630–1870. A unique data set on harvests, deaths, marriages and births is used to calculate cumulative elasticities of vital rates with respect to harvest. While earlier studies have mostly focused on the impact of real wage, this study contents that the calorie content of harvests is more related to Malthus’ concept of the ‘produce of land’. It finds that there indeed was a response of vital rates to harvest fluctuations, but there were important structural breaks. While positive checks attenuated after 1720, preventive checks were strengthened. After 1870 preventive checks disappeared, even if positive checks existed up to 1920. The results are robust to different models – DLM, ARMAX and SVAR – and trend specifications.
    Keywords: demography; Maltus; mortality; fertility; economic history
    JEL: N13 N33 N53
    Date: 2015–09–10
  5. By: William D. Nordhaus
    Abstract: What are the prospects for long-run economic growth? The present study looks at a recently launched hypothesis, which I label Singularity. The idea here is that rapid growth in computation and artificial intelligence will cross some boundary or Singularity after which economic growth will accelerate sharply as an ever-accelerating pace of improvements cascade through the economy. The paper develops a growth model that features Singularity and presents several tests of whether we are rapidly approaching Singularity. The key question for Singularity is the substitutability between information and conventional inputs. The tests suggest that the Singularity is not near.
    JEL: O3 O33 O4 O47
    Date: 2015–09
  6. By: Kris Inwood; Hamish Maxwell-Stewart; Deb Oxley
    Abstract: The earliest measures of well-being for Europeans born in the Pacific region are heights and wages in Tasmania. Evidence of rising stature survives multiple checks for measurement, compositional and selection bias. The challenges to health and stature seen in other nineteenth-century settler societies (the ‘antebellum paradox’) are not visible here. There was a strong correlation in Tasmania between stature and per capita GDP. We sketch an interpretation highlighting the role of relatively slow population growth and urbanization, a decline in food cost per family member available from a worker’s wage, and early recognition of the importance of public health.
    Date: 2015–04
  7. By: Chiu, Jonathan; Meh, Cesaire; Wright, Randall
    Abstract: The generation and implementation of ideas are crucial for economic performance. We study this in a model of endogenous growth, where productivity increases with innovation, and where the exchange of ideas (technology transfer) allows those with comparative advantage implement them. Search, bargaining, and commitment frictions impede the idea market, however, reducing efficiency and growth. We characterize optimal policies involving subsidies to innovative and entrepreneurial activity, given both knowledge and search externalities. The role of liquidity is discussed. We show intermediation helps by financing more transactions with fewer assets, and, more subtly, by ameliorating holdup problems. We also discuss some evidence.
    Keywords: Innovation, Growth, Liquidity, Intermediation, Search, Bargaining,
    Date: 2015
  8. By: Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This study presents an overlapping-generations model featuring capital accumu- lation, collective wage-bargaining, and probabilistic voting over fiscal policy. We characterize a Markov-perfect political equilibrium of the voting game within and across generations and show the following results. First, greater bargaining power of unions lowers the growth rate of capital and creates a positive correlation between unemployment and public debt. Second, greater political power of the old lowers the growth rate and shifts government expenditure from the unemployed to the old. Third, when the government finances its spending by issuing public debt, an introduction of a balanced-budget requirement increases the growth rate but may benefit the old at the expense of the unemployed.
    Keywords: Economic Growth; Fiscal Policy; Government Debt; Unemployment; Voting
    JEL: E24 E62 H60
    Date: 2014–08
  9. By: Marcel Ausloos; Giulia Rotundo; Claudiu Herteliu; Bogdan Vasile Ileanu
    Abstract: There are many constraints on population growth or decay in a country: several are of socio-economic origins. Sometimes cultual constraints also exist: sexual intercourse is banned in various religions, during Nativity and Lent fasting periods. We analyzed data consisting of registered daily birth records for very long (35,429 points) time series and many (24,947,061) babies in Romania between 1905 and 2001 (97 years). The data was obtained from the 1992 and 2002 censuses. We grouped the population into two categories (Eastern Orthodox and Non-Orthodox) in order to distinguish cultual constraints. We performed extensive data analysis in a comparative manner for both groups. From such a long time series data analysis, it seems that the Lent fast has a more drastic effect than the Nativity fast over baby conception within the Eastern Orthodox population, thereby differently increasing the population ratio. Thereafter, we developed and tested econometric models where the dependent variable is the baby conception deduced day, while the independent variables are: (i) religious affiliation; (ii) Nativity and Lent fast time intervals; (iii) rurality; (iv) day length; (v) weekend, and (vi) a trend background. Our findings are concordant with other papers, proving differences between religious groups on conception, - although reaching different conclusions regarding the influence of weather on fertility. The approach seems a useful hint for developing econometric-like models in other sociophysics prone cases.
    Date: 2015–09
  10. By: Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This study presents an overlapping-generation model featuring probabilistic vot- ing over two policy issues: pensions and public goods. The results show that as the population ages, the pension-to-GDP ratio and the growth rate of capital increase, but the public goods-to-GDP ratio decreases. Moreover, per retiree pension-to- GDP shows a hump-shaped pattern in response to population aging, but only a rising phase is valid under empirically plausible parameter values.
    Keywords: Economic Growth; Population Aging; Probabilistic Voting; Public Pension; Public Goods Provision
    JEL: D70 E24 H55
    Date: 2014–04
  11. By: Asongu, Simplice
    Abstract: The Kodila-Tedika & Bolito-Losembe (2014, ADR) finding on no evidence of causality flowing from State fragility to classical corruption or extreme corruption could have an important influence on academic and policy debates. Using updated data (1996-2010) from 53 African countries, we provide evidence of a positive (negative) nexus between political stability/no violence and corruption-control (corruption). As a policy implication, the finding of the underlying paper maybe more expositional than factual and should be treated with caution.
    Keywords: Fragility; Corruption; Conflicts; Africa
    JEL: F52 K42 O17 O55 P16
    Date: 2014–05
  12. By: Kodila-Tedika, Oasis; Asongu, Simplice A
    Abstract: This paper extends the growing literature on knowledge economy by investigating the effect of intelligence on economic diversification. Using a battery of estimation techniques that are robust to endogeneity, we find that human capital has positive correlations with export diversification, manufactured added value and export manufactures. This empirical evidence is based on a world sample for the year 2010. The findings have significant implications for the fight against the Dutch disease. In essence, investing in human capital could bring economic diversity and therefore dampen negative external shocks related to resource-dependence. Other knowledge-economy implications are discussed.
    Keywords: Intelligence; Economic Diversification
    JEL: I20 O10 O32 O40 O55
    Date: 2014–08
  13. By: Stephan Heblich (University of Bristol); Alex Trew (University of St. Andrews)
    Abstract: We exploit employment data from 10,528 parishes across nineteenth century England and Wales and find that a one standard deviation increase in finance employment increases the annualized growth rate of secondary labour by 0.8 percentage points. An endogenous growth model with finance and structural transformation motivates the empirical approach. Since initial banking access in 1817 may have been endogenously determined, we use instrumental variables to predict the location of country banks founded before the industrial take-off could possibly be expected. Distance and subsectoral analysis suggest that the effect of finance is highly localized and particularly strong for intermediate secondary sectors.
    Keywords: Banking; industrial revolution; structural transformation; regional economic growth; urbanization.
    JEL: O11 O16 O40 N23 R11
    Date: 2015–09–07
  14. By: Martinez, Pablo
    Abstract: The massive expenditures on foreign aid programs by developed nations and international institutions, in combination with the perceived lack of results from these disbursements, raise important questions as to the actual effectiveness of monetary assistance to less developed countries (LDCs). In this analysis, I focus on 104 low- and medium-development countries, and measure the impact that foreign aid has on their growth rates of gross domestic product, using dummy variables for geography and conflict in a geometric lag model. The results indicate that foreign aid donations do have a positive impact on the economic growth of the recipient nation. The effect is extremely modest, however, and other factors such as armed conflict and geography can easily mitigate this impact, in some cases to the extent that foreign aid becomes detrimental to economic growth. Further analysis of the results indicate that this impact is quickly felt, with half of the total impact of foreign aid felt in approximately six months
    Keywords: foreign aid, growth, developing countries
    JEL: E02 F35
    Date: 2015–09–10
  15. By: Lijuan Huo (Beijing Institute of Technology); Tae-Hwan Kim (Yonsei University); Yunmi Kim (University of Seoul)
    Abstract: Numerous empirical studies preset strong evidence supporting the positive relationship between Foreign Direct Investment (FDI) and the host countries¡¯ economic growth. Unlike most papers investigating this relationship using least squares-based regression, we analyze the effect of FDI on economic growth using quantile regression (QR). In this paper, we attempt to (i) reduce the omitted variable bias, (ii) solve the potential endogeneity problem of FDI, and (iii) allow heterogeneity across countries, using instrumental variable QR for panel data with fixed effect. Our empirical results reinforce the view that FDI is positively related to economic growth in under-developed countries where the rate of growth is relatively low.
    Keywords: FDI, Quantile Regression, Panel Data, Endogeneity, Instrumental Variable
    Date: 2015–09
  16. By: Pierre-Richard Agénor; Jan Mares; Piritta Sorsa
    Abstract: This paper studies how public policies, including pro-women interventions, can raise female labour force participation and promote economic growth in India. The first part provides a brief review of gender issues in the country. The second part presents a gender-based OLG model, based on Agénor (2015) and Agénor and Canuto (2015), that accounts for women’s time allocation between market work, child rearing, human capital accumulation, and home production. Bargaining between spouses depends on relative human capital stocks. The model is calibrated and various experiments are conducted, including investment in infrastructure, conditional cash transfers, and a reduction in gender bias in the market place. The analysis shows raising female labour force participation with a package of pro-growth and pro-women policies could boost the growth rate by about 2 percentage points over time.
    Keywords: gender equality, female labour force participation, gender, India
    JEL: I15 I25 J16 O41
    Date: 2015–09–07
  17. By: Michael Johannes (Columbia University); Lars Lochstoer (Columbia University); Pierre Collin-Dufresne (Ecole Polytechnique Federale de Lausanne)
    Abstract: Parameter learning strongly amplifies the impact of macro shocks on marginal utility when the representative agent has a preference for early resolution of uncertainty. This occurs as rational belief updating generates subjective long-run consumption risks. We consider general equilibrium models with unknown parameters governing either long-run economic growth, the variance of shocks, rare events, or model selection. Overall, parameter learning generates long-lasting, quantitatively significant additional macro risks that help explain standard asset pricing puzzles.
    Date: 2015
  18. By: SASAKI, Hiroaki
    Abstract: This study extends Baumol's (1967) two-sector (manufacturing and services) unbalanced growth model to analyze a situation in which, first, services are used for both final consumption and intermediate inputs in manufacturing production, and second, the productivity of the manufacturing and services sectors endogenously evolves. Using this model, we investigate how the employment share of services and economic growth rate evolve through time. Our results are summarized as follows. First, if the human capital accumulation function exhibits constant returns to scale with respect to per capita consumption of services, then we obtain a U-shaped relationship between the employment share of services and the economic growth rate. Second, if the human capital accumulation function exhibits decreasing returns to scale with respect to per capita consumption of services, the economic growth rate decreases at first, begins to increase after some time, decreases again, and finally, approaches zero.
    Keywords: service economy, economic growth, endogenous productivity growth, business services
    JEL: J21 J24 O11 O14 O30 O41
    Date: 2015–09

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