nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒11‒01
fifteen papers chosen by
Marc Klemp
Brown University

  1. The Bounty of the Sea and Long-Run Development By Pablo Selaya; Carl-Johan Dalgaard; Anne Sofie B. Knudsen
  2. Shaking up the Equilibrium: Natural Disasters, Immigration and Economic Geography By Philipp Ager; Casper Worm Hansen; Lars Lønstrup
  3. Life expectancy and education: Evidence from the cardiovascular revolution By Hansen, Casper Worm; Strulik, Holger
  4. Does trade cause long-run development? Theory and evidence from countries behind the Suez channel By Michiel Gerritse
  5. Innovation and Top Income Inequality By Ufuk Akcigit; Richard Blundell; David Hemous; Antonin Bergeaud; Philippe Aghion
  6. Is there a fertility paradox in Denmark? By Jørgen T. Lauridsen
  7. An improvement over the normal distribution for log-growth rates of city sizes: Empirical evidence for France, Germany, Italy and Spain By Puente-Ajovin, Miguel; Ramos, Arturo
  8. Looking beyond the R&D effects on innovation: The contribution of non-R&D activities to total factor productivity growth in the EU_x0003_ By jesus lopez-rodriguez; Diego Martinez
  9. Comparative Advantage, International Trade, and Fertility By Do, Quy-Toan; Levchenko, Andrei A.; Raddatz, Claudio
  10. Quantifying the Effects of Patent Protection on Innovation, Imitation, Growth, and Aggregate Productivity By Pedro Bento
  11. Regional dynamics of growth in the European Union: To what extent spatial spillovers matter? By Selin Ozyurt; Stephane Dees
  13. Impact of agglomeration on the regional growth of Latin American countries By Grace Carolina Guevara Rosero
  14. The Insecure Future of the World Economic Growth By Ron W Nielsen

  1. By: Pablo Selaya (University of Copenhagen); Carl-Johan Dalgaard (University of Copenhagen); Anne Sofie B. Knudsen (University of Copenhagen)
    Abstract: What is the long run impact on development from di¤erences in subsistence strategies during pre- industrial times? Whereas this question has been explored from the point of view of agriculture, remark- ably little attention has been paid to the complementary strategy of relying on marine resources. As a step towards closing this gap, we construct an index ??the Bounty of the Sea index ?which captures the potential abundance of exploitable marine ?sh that individual countries have had access to, and proceed to explore its correlation with economic development. Our analysis reveals that a greater Bounty of the Sea stimulated pre-industrial development, and that countries inhabited by people with ancestry in regions with abundant marine resources are richer today. Probing possible underlying reasons, we ?nd that populations with ancestry in regions rich in marine resources di¤er from societies with a purely agrarian legacy in terms of institutions, cultural values and average personality traits.
    Keywords: Fishing, Economic Development, Personality, Culture, Institutions
    JEL: O11 O13 O47 O57
  2. By: Philipp Ager (Department of Business and Economics, University of Southern Denmark); Casper Worm Hansen (Department of Economics, University of Copenhagen); Lars Lønstrup (Department of Business and Economics, University of Southern Denmark)
    Abstract: This paper investigates the effects of a large temporary shock on the agglomeration of economic activity. Using variation in the potential damage intensity of the 1906 San Francisco earthquake across counties in the American West, we ?find that the earthquake persistently decreased various measures of economic activity, such as population size and total wage expenditures. The main reason for this long-lasting effect is that the earthquake changed the location choice of migrants, who decided to settle in less affected areas of the American West. Our fi?ndings suggest that a large temporary shock can have a persistent effect on the location of economic activity.
    Keywords: Natural Disasters, Economic Development, Location of Economic Activity, Immigration
    JEL: N9 O15 O40 R11 R12
    Date: 2015–10–23
  3. By: Hansen, Casper Worm; Strulik, Holger
    Abstract: This paper exploits the unexpected decline of deaths from cardiovascular diseases since the 1970s as a large positive health shock that affected predominantly old-age mortality; i.e., the fourth stage of the epidemiological transition. Using a differences-in-differences estimation strategy, we find that U.S. states with higher levels of cardiovascular-disease mortality prior the 1970s experienced greater increases in adultlife expectancy and higher education enrollment. Our estimates suggest that the cardiovascular revolution caused an increase in life expectancy of 1.5 years and an increase in education enrollment of 9 percentage points, i.e. 52 percent of the observed increase from 1960 to 2000.
    Keywords: adult life expectancy,higher education,cardiovascular diseases,differences-in-differences strategy
    JEL: I15 J24 N30 O10 O40
    Date: 2015
  4. By: Michiel Gerritse
    Abstract: Does trade improve institutions and contribute to long run growth? I develop a theory of trade, in which trade liberalization provides incentive to change institutions in two ways. On the one hand, trade leads to specialization according to comparative advantage, expanding the industries that do not rely on contracting institutions in less developed countries. The Heckscher-Ohlin-type effect lowers the demand for contract enforcement, as documented in earlier literature. On the other hand, if firms are imperfectly competitive, they have an interest in minimizing their marginal costs. As institutional frictions in the factor markets are costly, they raise output prices and cause losses of sales for imperfectly competitive firms. When the economy opens up, the sales-reducing effects of poor institutions are aggravated, because the effective market size increases. As a result, increased market acces through trade liberalization can increase the demand for contract. Thus, trade liberalization may also increase the demand for good institutions. That idea underlies much of the debates on globalization and 'aid for trade', and this is one of the first papers to provide an economic rationale. I exploit the 1967-1975 war-induced closing of the Suez channel as a quasi-natural experiment. The war between Israel and Egypt was not anticipated, let alone caused by countries on the Eastern coast of Africa. During the closing of the channel, countries in the east of Africa had substantially larger trade costs towards Europe than countries on the western coast, which led to significant declines in trade volume. When the Suez channel was closed, countries with increased trade costs specialized in industries that relied less on institutions (less fixed costs, less differentiated products, less contract-intensive inputs). The opening up of the Suez channel in 1975 caused the opposite effect. The trade cost shock is arguably exogenous and I use a dif-in-dif-in-dif (country - industry - trade cost) estimator to control for the effects of trade costs at the country and industry level. The increase in trade costs held exclusively for shipping, thus making access to information, capital or people a less likely explanation for the results. The results persist even though comparative advantage determines trade patterns - capital-intensive industries benefitted from increased trade costs to Europe. The results therefore suggest that trade liberalization does not deteriorate institutions in less developed countries.
    Keywords: institutions and trade; dif-in-dif/quasi experiment; long-run development
    JEL: O19 F43 C31 F11 N77 F12 O43 O11
    Date: 2015–10
  5. By: Ufuk Akcigit (University of Pennsylvania); Richard Blundell (University College London); David Hemous (INSEAD); Antonin Bergeaud (Banque de France and Ecole polytechnique); Philippe Aghion (Harvard University)
    Abstract: In this paper we use cross-state panel data to show a positive and significant correlation between innovativeness and top income inequality in the United States over the past decades. Our instrumentation at cross-state level suggests that this correlation (partly) reflects a causality from innovativeness to top income inequality. Next, using cross commuting zones (CZ) data, we show that innovativeness is positively and significantly correlated with social mobility, and that this correlation is driven mainly by entrant innovators and less so by incumbent innovators. In addition, the positive effects of innovation on the top 1% income share and on social mobility are both dampened in states with higher lobbying intensity. Overall, our findings are in line with the Schumpeterian view whereby the rise in top income shares in developed countries and particularly in the US over the past decades, is at least partly related to innovation-led growth, where innovation itself fosters social mobility at the top through the process of creative destruction.
    Date: 2015
  6. By: Jørgen T. Lauridsen
    Abstract: Alike most of the Western world, the Danish fertility rate declined throughout the 20th century simultaneous to economic growth. This development, which conflicts with economic intuition, has been denoted the fertility paradox, and several studies have been devoted to resolve it. The present study analyzes the geographic variation across Danish municipalities in the fertility rate during the years 1982 to 2004. Several factors commonly believed to explain the variation in the fertility rate is found to be exerted to considerable regional variation. A model linking the fertility rate to several economic determinants is established and further modified to capture geographic small-area variation. A positive correlation between regional levels of income and fertility is found, which contradicts the fertility paradox. Thus, the necessity of separating small-area and dynamic variation, aiming at obtain a proper interpretation of the link between fertility and its determinants, is demonstrated.
    Keywords: Spatial econometrics; Demography; Fertility; Regional population variation
    JEL: C21 N3 J13 R23
    Date: 2015–10
  7. By: Puente-Ajovin, Miguel; Ramos, Arturo
    Abstract: We study the decennial log-growth population rate distributions of France (1990-2009), Germany (1996-2006), Italy (1951-1961, 2001-2011) and Spain (1950-1960, 2001-2010). It is obtained an excellent parametric description of these log-growth rates by means of a modification of the normal distribution in that the tails are mixed by means of convex linear combinations with exponential distributions, giving rise to the so called “double mixture exponential normal”. The normal distribution is not the one empirically observed for the same datasets.
    Keywords: urban log-growth rates distribution, exponential distribution, normal distribution, European population log-growth rates
    JEL: C46 R11 R12
    Date: 2015–10–27
  8. By: jesus lopez-rodriguez; Diego Martinez
    Abstract: Although non-R&D innovation activities account for a significant portion of innovation efforts carried out across very heterogeneous economies in Europe, how to incorporate them in to economic models is not always straightforward. For instance, the traditional macro approach to estimating the determinants of total factor productivity (TFP) does not handle them well. To counter these problems, this paper proposes applying an augmented macro-theoretical model to estimate the determinants of TFP by jointly considering the effects of R&D and the impact of non-R&D innova- tion activities on the productivity levels of ?firms. Estimations from a model of a sample of EU-26 countries covering the period 2004-2008 show that the distinction between R&D and non-R&D e¤ects is significant for a number of diffffrent issues. First, the results show a sizable impact on TFP growth, as the impact of R&D is twice that of non-R&D. Second, absorptive capacity is only linked to R&D endowments. And third, the two types of endowments cannot strictly been seen as complementary, at least for the case of countries with high R&D intensities or high non-R&D intensities.
    Keywords: TFP; R&D; non-R&D expenditures; EU countries.
    JEL: O0 O3 O4
    Date: 2015–10
  9. By: Do, Quy-Toan; Levchenko, Andrei A.; Raddatz, Claudio
    Abstract: We analyze theoretically and empirically the impact of comparative advantage in international trade on fertility. We build a model in which industries differ in the extent to which they use female relative to male labor, and countries are characterized by Ricardian comparative advantage in either female-labor or male-labor intensive goods. The main prediction of the model is that countries with comparative advantage in female-labor intensive goods are characterized by lower fertility. This is because female wages, and therefore the opportunity cost of children are higher in those countries. We demonstrate empirically that countries with comparative advantage in industries employing primarily women exhibit lower fertility. We use a geography-based instrument for trade patterns to isolate the causal effect of comparative advantage on fertility.
    Keywords: comparative advantage; fertility; trade integration
    JEL: F16 J13 O11
    Date: 2015–10
  10. By: Pedro Bento (Texas A&M University, Department of Economics)
    Abstract: I develop a general equilibrium model in which patent protection affects sequential innovation, original innovation, and imitation. Protection increases the cost of working around existing patents, but imposes costs disproportionately for innovators and imitators. Depending on these relative costs, protection can in theory increase or decrease markups, imitation, long-run growth, and aggregate productivity. Using data from several different sources, I calibrate the model and quantitatively assess the effects of patent protection in practice. I find that weakening protection in the U.S. would lead to no change in markups and imitation, no change in long-run growth, a more than doubling of the number of firms, and an increase in aggregate productivity of 11 percent.
    Keywords: patent protection, firm size, productivity, innovation, imitation, competition
    JEL: O1 O3 O4
    Date: 2015–08–01
  11. By: Selin Ozyurt; Stephane Dees
    Abstract: This paper investigates the main determinants of economic growth in the European Union from a regional perspective. The analysis is based on a recently available dataset from the European Cluster Observatory covering 253 European regions over the period 2002-2008. In addition to the traditional determinants of regional growth (such as investment, human capital developments, innovation and infrastructure endowment), the growth analysis accounts for spatial effects related to the existence of externalities from neighbouring regions. The spatial Durbin fixed-effect panel specification captures spatial feedback effects from the neighbours through spatially lagged dependent and independent variables. Social-economic environment and traditional determinants of growth are found to be significant. In particular, investment, infrastructure and human capital endowment, accessibility and innovation capacity explain both growth dynamics and cross regional differences. We do not find evidence of convergence among regions over the study period. By contrast, we detect a regional cluster in the core of Europe specialised in activities with high growth potential. Our findings confirm the significance of spatial spillovers. Specifically, business investment and skilled workforce migration have a positive ? direct and indirect ? impact on economic growth of the European regions.
    Keywords: Spatial Durbin Panel Models; Economic Growth; Cluster Analysis; European Union;
    JEL: R12
    Date: 2015–10
    Abstract: In our research we are trying to determine the impact of the evolution of the public expenditure of research and development on the main macroeconomic variables such us GDP growth, consumption and gross fix capital formations taken as investments in the case of the European Union. We have analysed the impact of research and development expenditure by taking into consideration the impulse response functions of a Bayesian VAR model, based on a panel approach. Our results are showing a lasting effect of the R&D expenditures on all the macroeconomic variables taken into consideration. Also, by analysing the variance decomposition we have showed that the influence of the R&D expenditures is significant in accordance with the literature review.
    Keywords: public expenditure, research and development, VAR model, impulse function
    JEL: H52
  13. By: Grace Carolina Guevara Rosero
    Abstract: Theoretical approaches have been developed to examine the effect of agglomeration on growth. However, the understanding of the mechanisms of agglomeration in developing countries remains unaddressed. This paper aims to give empirical evidence of the role of agglomeration on the growth of Latin American regions. The study of the subcontinent is crucial because of the evidence of a rapid pace of urbanization process. Using a database with information of 162 regions of 8 Latin American countries (Argentina, Bolivia, Chile, Colombia, Ecuador, Mexico, Panama and Peru) during the period 2000-2009, we estimate the effect of agglomeration on regional growth in three periods. The measures of agglomeration are urbanization rate and population density. The data is based on the information provided by the National Institutes of Statistics and the Central Banks of each country. The geographical coordinates were obtained from the GeoHack system of Wikitech. The control variables are: educated labor force, public investment and sectoral specialization. After proving that our variables of agglomeration instrumented with altitude are not endogenous and given the finding of spatial correlation between Latin American regions, a spatial autoregressive panel model with fixed effects is estimated by Maximum Likelihood. For the sake of this estimation, we apply three spatial weight matrices. The first one is the k=1nearest neighbors weight matrix which is interpreted as the configuration of low integration. The second one is the weight matrix based on Gabriel method which is interpreted as the configuration of moderate integration. And the third one is a distance weight matrix where all regions are connected. It is interpreted as the configuration of quasi-complete integration. Our findings suggest that agglomeration is vital for the regional growth. However, the effect of agglomeration is not the same everywhere. In this line, we test Williamson?s (1965) hypothesis of more pronounced agglomeration effects at early stages of development than at later stages of development. Using the statistical theory proposed by Hansen (2000), the threshold value of level of development at which the effect of urbanization changes was 5700 dollars of per capita income. Low-developed regions experience larger positive effects of urbanization on their economic growth than high-developed regions. In our sample, the positive effects vanish at 10,500 dollars of per capita income. Finally, the degree of spatial autocorrelation increases with the level of integration that the spatial weight matrix reflects.
    Keywords: regional growth; spatial; urbanization; Latin America; agglomeration economies
    JEL: R11 O18 O54 R15
    Date: 2015–10
  14. By: Ron W Nielsen
    Abstract: Growth rate of the world Growth Domestic Product (GDP) is analysed to determine possible pathways of the future economic growth. The analysis is based on using the latest data of the World Bank and it reveals that the growth rate between 1960 and 2014 was following a trajectory approaching asymptotically a constant value. The most likely prediction is that the world economic growth will continue to increase exponentially, which over a sufficiently long time is unsustainable. A more optimistic but less realistic prediction is based on the assumption that the growth rate will start to decrease linearly. In this case, the world economic growth is predicted to reach a maximum, if the growth rate is going to decrease linearly with time, or to follow a logistic trajectory, if the growth rate is going to decrease linearly with the size of the world GDP.
    Date: 2015–10
  15. By: Zsolt Krajcsik (University of Miskolc)
    Abstract: The analysis of economic growth and development is coeval with economics. The importance of it is shown by the constant development of theories concerning economic growth during the ages. In my paper I introduce the most important models of the field. I summarise the change from the early development models which depended on the homogenous factors of production - land, labour, capital - to the current ones which depend on the human capital growth and development. Nowadays there are two path in the mentioned research. One of them is dealing with the Solow growth model and think toward and explain the developing countries economic growth with the human capital and its characteristics. The other line of analysis deals with the distribution of income between the factors of production. In the second part of the last century a new wave of theories appeared. According to them in the globalised world it is unwise to deal with economic growth in a narrow way - within the borders of a country - because the international trade, distribution of labour and dependence relations have a big effect on it (Girco and Keohane in: Bartha et al., 2013). Institutional economics marks new ways of research as well, so the education becomes the centre of attention during the research of economic development. The main goal of the review of the literature of growth and development economics is to lay the foundations of my research modelling on the relation of future economic growth and the higher education system.
    Date: 2015–10–15

This nep-gro issue is ©2015 by Marc Klemp. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.