nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒11‒07
twelve papers chosen by
Marc Klemp
Brown University

  1. Pollution and Mortality in the 19th Century By W. Walker Hanlon
  2. Political Economy of Debt and Growth By Marco Battaglini; Levon Barseghyan
  3. Democracy and Income: taking parameter heterogeneity and cross-country dependency into account By Tiago Sequeira
  4. Boserup versus Malthis: does population pressure drive agricultural intensification? Evidence from Burundi By Desiere, Sam; D'Haese, Marijke
  5. Diversity and Economic Growth in a Model with Progressive Taxation By Wang, Wei; Suen, Richard M. H.
  6. The Relationship Between R&D Expenditures and Economic Growth: Panel Data Analysis 1990-2013 By Begüm Erdil Şahin
  7. Comparative Advantage, International Trade, and Fertility By Quy-Toan Do; Andrei A. Levchenko; Claudio Raddatz
  8. The Nexus of Economic Growth, Military Expenditures and Income Inequality By Ünal Töngür; Adem Yavuz Elveren
  9. Credit constraints and growth in a global economy By Nicolas Coeurdacier; Stéphane Guibaud; Keyu Jin
  10. Fiscal policy and economic growth: Empirical evidence from the European Union. By Dimitrios Paparas; Christian Richter
  11. Generically distributed investments on flexible projects and endogenous growth. By Mauro Bambi; Cristina Di Girolami; Salvatore Federico; Fausto Gozzi
  12. Public Debt and Growth: An Empirical Investigation By Duygu Canbek

  1. By: W. Walker Hanlon
    Abstract: Mortality was extremely high in the industrial cities of the 19th century, but little is known about the role played by pollution in generating this pattern, due largely to a lack of direct pollution measures. I overcome this problem by combining data on the local composition of industries in Britain with information on the intensity with which industries used polluting inputs. Using this new measure, I show that pollution had a strong impact on mortality as far back as the 1850s. Industrial pollution explains 30-40% of the relationship between mortality and population density in 1851-60, and nearly 60% of this relationship in 1900. Growing industrial coal use from 1851-1900 reduced life expectancy by at least 0.57 years. A back-of-the envelope estimate suggests that the value of this loss of life, expressed as a one-time cost, was equal to at least 0.33-1.00 of annual GDP in 1900. Overall, these results show that industrial pollution was a major cause of mortality in the 19th century, particularly in urban areas, and that industrial growth during this period came at a substantial cost to health.
    JEL: I10 N33 N53 Q53
    Date: 2015–10
  2. By: Marco Battaglini; Levon Barseghyan
    Abstract: We present a theory of endogenous fiscal policy and growth. Fiscal policy — debt, income tax, spending on local public goods and public investment — is determined through legislative bargaining. Economic growth depends directly on public investment, private investment in human capital and, via learning-by-doing, labor supply. The model predicts that the economy converges to a balanced growth path in which consumption, private investment, public investment, public goods provision, public debt and productivity grow at the same constant rate. The transition to the balanced growth path is characterized by what we call the shrinking government effect: public debt grows faster than GDP, provisions of public goods and infrastructure grow slower than GDP and the tax rate declines. We use the model to study the impact of austerity programs which impose a ceiling on the amount of public debt a country can issue.
    JEL: D72 E6 E62 H6 H72
    Date: 2015–10
  3. By: Tiago Sequeira (Universidade da Beira Interior and CEFAGE-UBI)
    Abstract: This paper investigates the relationship between income and democracy using common correlated effects (CCE) estimators which take into account the fact that democracy variables are highly correlated across countries and the possibility of heterogeneous effects of income on democracy across countries. Using a wider database than ever, covering annual data from 1800 to 2010 for almost all countries, we show that overall, the effect of income on democracy is statistically non-significant or significantly negative when the time-series features of the data are taken into account. This calls back into question the controversy about the empirical effect of income on democracy.
    Keywords: Democracy; Income.
    JEL: I25 N10 N30 O10 O50 Z10
    Date: 2015
  4. By: Desiere, Sam; D'Haese, Marijke
    Abstract: Will a growing population lead to depletion of natural resources and eventually economic collapse, as predicted by Malthus, or rather to innovations in the agricultural sector improving agricultural potential of land, as hypothesized by Boserup? This centuries-old puzzle is as relevant as ever in some densely populated regions of Sub-Saharan Africa where population growth is still alarmingly high and shows no sign of slowing down, leading to enormous pressure on land. In this paper, we quantify the relationship between population pressure and land intensification in Burundi, one of the most densely populated regions in Africa. Using data from a nationally representative agricultural survey (n=2050), we find evidence of both Malthusian and Boserupian processes. In line with Boserup’s theory, the use of fertilizer and labour, yields and food production initially increases with population pressure, but decreases again when population densities exceed a critical threshold, supporting Malthus’ prediction. These limits to intensification confirm findings from previous studies on densely populated regions in Sub-Saharan Africa.
    Keywords: Agribusiness, Crop Production/Industries,
    Date: 2015
  5. By: Wang, Wei; Suen, Richard M. H.
    Abstract: Is a more heterogeneous population conducive or detrimental to capital accumulation and economic growth? This paper addresses this question using a dynamic general equilibrium model with ex ante heterogeneous consumers and progressive taxation. We show that the answer depends crucially on the shape of the marginal tax function. If this function is concave, then a more heterogeneous population will have a lower average marginal tax rate and a higher level of capital accumulation. The opposite is true when the marginal tax function is convex. These results are robust in a variety of models with either exogenous or endogenous economic growth.
    Keywords: Consumer Heterogeneity, Progressive Taxation, Economic Growth
    JEL: D31 E62
    Date: 2015–10–30
  6. By: Begüm Erdil Şahin (Istanbul Kultur University)
    Abstract: In the world of globalization, economic growth is associated with the amount of innovation created. The expenditures on new product development thus R&D is the main factor for the economic growth of both developed and developing countries. R&D expenditures are in the center of new growth theories. The countries that produce technologically advanced products have the ability to compete internationally and show progress in production levels and qualities. The purpose of this study is to explore the relationship between R&D expenditures and economic growth using panel data analysis. As a result of the analysis, covering 15 OECD countries for the period between 1990 and 2013, a positive relationship has been determined between R&D expenditures and economic growth.
    Keywords: R&D Expenditures, Economic Growth, Panel Data Analysis
    JEL: O10 O30 O40
    Date: 2015
  7. By: Quy-Toan Do; Andrei A. Levchenko; Claudio Raddatz
    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.
    JEL: F16 J13 O11
    Date: 2015–10
  8. By: Ünal Töngür (Middle East Technical University, Department of Economics); Adem Yavuz Elveren (Fitchburg State University, Department of Economics, History and Political Science)
    Abstract: There exists an extensive literature on the effect of military expenditures on economic growth. The literature presents conflicting results and appears lacking the possible effect of inequality. Considering these two issues in the literature, this study follows up the single country case study of Töngür and Elveren (2014)* to provide evidence for the relationship between military expenditures and economic growth for a large group of countries in panel data context for an extended time period by considering income inequality within the augmented Solow growth model.
    Keywords: Military Expenditures, Economic Growth, Income Inequality, Augmented Solow Growth Model, Panel Data
    Date: 2015
  9. By: Nicolas Coeurdacier; Stéphane Guibaud; Keyu Jin
    Abstract: We show that in an open-economy OLG model, the interaction between growth differentials and household credit constraints—more severe in fast-growing countries— can explain three prominent global trends: a divergence in private saving rates between advanced and emerging economies, large net capital outflows from the latter, and a sustained decline in the world interest rate. Micro-level evidence on the evolution of age-saving profiles in the U.S. and China corroborates our mechanism. Quantitatively, our model explains about a third of the divergence in aggregate saving rates, and a significant portion of the variations in age-saving profiles across countries and over time.
    Keywords: household credit constraints; age-saving profiles; international capital flows; allocation puzzle.
    JEL: F21 F32 F41
    Date: 2015
  10. By: Dimitrios Paparas (Harper Adams University, UK); Christian Richter (German University in Cairo, Egypt)
    Abstract: The role of Fiscal policy in the long run growth process has been crucial in macroeconomics since the appearance of endogenous growth models. Additionally, a significant debate among economists involves whether several types of spending or taxation enhance economic growth. The main objective of this paper is to highlight the relationship between fiscal policy and economic growth in the EU-15, and to make an attempt to determine which of the fiscal policy instruments enhance economic growth.  We deployed panel data techniques and included both sides of budget, spending and taxation, in our regressions and used the most recent dataset data for fiscal variables from Eurostat. We made a new classification of public expenditures into homogeneous groups in order to reduce the explanatory variables and increase the efficiency of our model and results since we have data for only 14 years. In our empirical analysis we included OLS, fixed effects models, random effects models and GMM estimators, the Arellano and Bond (1991) and the Arellano and Bover (1995) - Blundell and Bond (1998) estimators. On the first round of our regressions we find a negative impact of spending on human capital accumulation on economic growth. Our empirical results also indicate that an increase in government spending on infrastructure has a significant positive impact on the economic growth of a country. Additionally, in our regressions the variable government spending on property rights protections include spending on defence and spending on public order safety. Our empirical results from the first round of regressions imply a strongly negative relationship between t hese two variables. However, on the second round of our regressions we aggregate defence spending from spending on property right protection and we did not find any relationship between economic growth and defence spending. Moreover, we found a non-significant relationship between government spending on social protection and economic growth. On the second round of regressions, when we allow for non-linear growth effects we find a positive relationship with deficits and economic growth, which is in contrast with Ricardian Equivalence. We also included the employment growth and business investment in our model because labour and capital are very important factors of production in growth models. In our empirical results we do not find a significant impact of employment on economic growth, but when we allow for non-linear growth effects we find a strongly positive impact. However, we found that gross fixed capital formation of the private sector as a percentage of GDP in both rounds of our regressions, has no significant impact on economic growth. Finally, our empirical results do not support any evidence of a relationship between openness and economic growth.
    Keywords: Panel Data. Fiscal Policy. Taxation. Government Expenditures.
    JEL: C23 C33 E62 H2 H5
    Date: 2015
  11. By: Mauro Bambi (University of York, Department of Economics and Related Studies, York, UK); Cristina Di Girolami (Università di Pescara, Dipartimento di Economia Aziendale, Pescara, Italy; Département de Mathèmatiques, Avenue Olivier Messiaen 72085 Le Mans Cedex 9, France); Salvatore Federico (Dipartimento di Scienze per l'Economia e l'Impresa, Universita' degli Studi di Firenze, Italy); Fausto Gozzi (Dipartimento di Scienze Economiche ed Aziendali, Università LUISS - Guido Carli, Rome, Italy)
    Abstract: In this paper we study an endogenous growth model where investments are (generically) distributed over multi-period flexible projects leading to new capital once completed. Recently developed techniques in dynamic programming are adapted and used to unveil the global dynamics of this model. Based on this analytical ground, several numerical exercises are performed to show the quantitative relevance of the analytical findings with an emphasis on the relation between project features and economic growth and speed of convergence toward the balanced growth path.
    Keywords: Endogenous growth, investment projects, distributed delays, optimal control, dynamic programming, infinite dimensional problems.
    JEL: E22 E32 O40
    Date: 2015–10
  12. By: Duygu Canbek (Atilim University)
    Abstract: In this research, the relationship between public debt and growth for a panel sample of 128 countries including 26 advanced, 40 emerging and 62 developing economies for a period of 1960-2011 is investigated. To this end, not only the conventional fixed effects procedure but also the recently developed cross sectionally augmented distributed lag (CS-DL) mean group (MG) procedure is considered. Also, it is investigated whether the relationship is robust to different country groupings such as advanced, emerging and developing economies and to different debt levels such as suggested. In the study, bivariate equations for debt and growth and conventional growth equations augmented with debt threshold variables are estimated. The results suggest that the negative impact of the public debt on growth appears to be more severe in emerging market countries than both advanced and developing countries. The results also lend a support to the view that the growth is invariant to different public debt levels in advanced countries. Moreover, according to the results, not only the debt growth but also the acceleration of the debt negatively affects economic growth. Emerging economies suffer most from the debt whilst the advanced economies suffer the least. Also a rising debt structure lead to a remarkable slowdown the growth for emerging and developing economies rather than the advanced ones.
    Keywords: Public Debt, Growth, Threshold Value, Panel Data, Emerging Economies, Cross-Section dependence
    JEL: Q5 C23 O57
    Date: 2015

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