nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒11‒21
fourteen papers chosen by
Marc Klemp
Brown University

  1. Islam, Inequality and Pre-Industrial Comparative Development By Stelios Michalopoulos; Alireza Naghavi; Giovanni Prarolo
  2. Weak instruments in growth regressions : implications for recent cross-country evidence on inequality and growth By Kraay,Aart C.
  3. Roots of the Industrial Revolution By Morgan Kelly; Joel Mokyr; Cormac Ó Gráda
  4. Quantity versus Quality: Household structure, number of siblings, and educational attainment in the long nineteenth century By Sarah Carmichael; Auke Rijpma; Lotte van der Vleuten
  6. Reply to Tracy Dennison and Sheilagh Ogilvie: The European Marriage pattern and the Little Divergence By Sarah G. Carmichael; Alexandra de Pleijt; Jan Luiten van Zanden; Tine De Moor
  7. The Historical Origins of Poverty in Developing Countries By Bhattacharyya, Sambit
  8. Schumpeterian growth with technological interdependence: An application to US states By Deeken, Tim
  9. How Democracy could foster Economic Growth: The Last 200 Years By Leonard, Carol S.; Yanovskiy, Konstantin Ė.; Shestakov, D.
  10. Accounting for Productivity Growth: Schumpeterian versus Semi-Endogenous Explanantions By Johannes W. Fedderke and Yang Liu
  11. Patterns of Manufacturing Growth in Sub-Saharan Africa: From Colonization to the Present By Gareth Austin; Ewout Frankema; Ewout Morten Jerven
  12. Beyond capital fundamentalism: Harrod, Domar and the history of development economics By Mauro Boianovsky
  13. A Positive Theory of Economic Growth and the Distribution of Income By Allan H. Meltzer; Scott F. Richard
  14. Cyclically Balanced Growth Paths in a Model of Economic Growth with Endogenous Policy Switching By Andrei S. Akhremenko; Alexander P. Petrov; Egor A. Yureskul

  1. By: Stelios Michalopoulos (Brown University and the NBER); Alireza Naghavi (University of Bologna and Centro Studi Luca d'Agliano); Giovanni Prarolo (University of Bologna)
    Abstract: This study explores the interaction between trade and geography in shaping the Islamic economic doctrine and in turn the comparative development of the Muslim world. 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 from the poorly endowed ones. We show that in such an environment it was mutually beneficial to institute an economic system of income redistribution featuring direct income transfers in return for safe passage to conduct trade. A com-mitment problem, however, rendered a merely static redistribution system unsustainable. Islam add-ed a set of dynamic redistributive rules that were self-enforcing under large gains from trade and high proportions of arid land. While such principles fostered the expansion of trade within the Mus-lim world they limited the accumulation of wealth by the commercial elite, shaping the economic trajectory of Islamic lands in the preindustrial era.
    Keywords: Religion, Islam, Geography, Inequality in land quality, Wealth accumulation, Public good investment, Trade, Conflict.
    JEL: O10 O13 O16 O17 O18 F10 Z12
  2. By: Kraay,Aart C.
    Abstract: This paper revisits four recent cross-country empirical studies on the effects of inequality on growth. All four studies report strongly significant negative effects, using the popular system generalized method of moments estimator that is frequently used in cross-country growth empirics. This paper shows that the internal instruments relied on by this estimator in these inequality-and-growth regressions are weak, and that weak instrument-consistent confidence sets for the effect of inequality on growth include a wide range of positive and negative values. This suggests that strong conclusions about the effect of inequality on growth? in either direction?cannot be drawn from these studies. This paper also systematically explores a wide range of alternative sets of internal instruments, and finds that problems of weak instruments are pervasive across these alternatives. More generally, the paper illustrates the importance of documenting instrument strength, basing inferences on procedures that are robust to weak instruments, and considering alternative instrument sets when using the system generalized method of moments estimator for cross-country growth empirics.
    Keywords: Pro-Poor Growth,Arts&Music,Debt Markets,Inequality,Poverty Impact Evaluation
    Date: 2015–11–13
  3. By: Morgan Kelly; Joel Mokyr; Cormac Ó Gráda
    Abstract: We analyze factors explaining the very different patterns of industrialization across the 42 counties of England between 1760 and 1830. Against the widespread view that high wages and cheap coal drove industrialization, we find that industrialization was restricted to low wage areas, while energy availability (coal or water) had little impact Instead we find that industrialization can largely be explained by two factors related to the human capability of the labour force. Instead of being composed of landless labourers, successful industrializers had large numbers of small farms, which are associated with better nutrition and height. Secondly, industrializing counties had a high density of population relative to agricultural land, indicating extensive rural industrial activity: counties that were already reliant on small scale industry, with the technical and entrepreneurial skills this generated, experienced the strongest industrial growth. Looking at 1830s France we find that the strongest predictor of industrialization again is quality of workers shown by height of the population, although market access and availability of water power were also important.
    Keywords: Industrial revolution; Economic history; Economic growth
    JEL: N N13 O52
    Date: 2015–10
  4. By: Sarah Carmichael; Auke Rijpma; Lotte van der Vleuten
    Abstract: This paper analyses the quantity-quality trade-off and other household-level influences on educational outcomes of children. Nineteenth and early-twentieth century census micro-data is used, providing material from Western and Eastern Europe, the USA and Canada. This is the time-frame of the demographic transition and the onset of modern economic growth; when the quantity-quality trade-off should be most important. Besides the number of siblings, other household features can be of influence as well, such as the gender composition, the inclusion of members outside the nuclear family and the position of women in the household. We find mixed evidence for the quantity-quality trade-off, as well as positive effects of the presence of (upwards) extended family members and parental, especially maternal, literacy.
    Keywords: human capital, fertility, demographic transition, economic history
    Date: 2015–11
  5. By: Tang, John P.
    Abstract: Economic development leads to improved health over time due to increased access to medical treatment, sanitation, and income, but in the short run the relationship may be negative given disease exposure from market integration. Using a panel dataset of vital statistics for late nineteenth century Japan, I find mortality rates increased during the country's early industrialization period and that railroad access accounts for over five percent of average mortality. Estimates from a triple-differences framework indicate that communicable disease mortality accounts for 91 percent of the additional incidence, which suggests that improved transport may have operated as a vector for transmission.
    Keywords: disease contagion, market integration, mortality Kuznets curve, railroad transport
    JEL: J11 N75 O14
    Date: 2015–11
  6. By: Sarah G. Carmichael; Alexandra de Pleijt; Jan Luiten van Zanden; Tine De Moor
    Abstract: This reply reviews the evidence presented by Dennison and Ogilvie that the European Marriage Pattern did not contribute to economic growth in Early Modern Europe (EMP). First, we argue that the link between the EMP and economic growth is not conceptualized correctly. Age of marriage is not a correct index of the degree to which countries were characterized by EMP. Secondly, we show that our alternative interpretation of the EMP, focusing on the underlying institutions and the related balance of power between men and women, solves this problem. We find a strong correlation between economic growth and female agency.
    Keywords: Marriage patterns, Economic growth, Institutions
    Date: 2015–11
  7. By: Bhattacharyya, Sambit
    Abstract: In this chapter I explore the causal relationships between historical factors (for eg., geography, disease, colonial history, and technology) and poverty in developing countries. I start with a review of the existing theories. This is followed by a novel unified framework in order to causally relate these historical factors in explaining the process of development in Western Europe and the New World colonies. The final section applies this framework to explain why Africa, Latin America, and Russia fell behind. My central argument is that Western Europe benefitted from favourable geography which led to highly productive agriculture, food surplus, and institutions conducive to development. In contrast, Africa continues to suffer from unfavourable geography and disease. Institutional weaknesses in Latin America and Russia explain their relatively weak long term economic performance. I also argue that these historical factors matter for contemporary patterns of development across the globe. The chapter concludes with some suggestions for future research on this topic.
    Keywords: root causes, poverty
    JEL: N0 O1
    Date: 2016–04
  8. By: Deeken, Tim
    Abstract: In this paper, the Schumpeterian growth model developed by Ertur and Koch (2011) that includes spatial interactions between units of observation working via R&D spillovers is presented in detail. The implications of this model and three additional growth models with and without spatial interaction that are nested within this framework are tested for the US states econometrically. It is found that investments in R&D have a positive impact on steady-state income per worker in the Schumpeterian growth model without complex interaction between states, but this effect is absent in the model proposed by Ertur and Koch (2011), even though the estimate for the coefficient measuring interconnectedness between regions is positive and significant. This latter result is robust to alternative specifications of the interaction matrix.
    Keywords: R&D spillovers,Schumpeterian growth,spatial econometrics
    JEL: O18 O47 R11 C31
    Date: 2015
  9. By: Leonard, Carol S.; Yanovskiy, Konstantin Ė.; Shestakov, D.
    Abstract: In this paper we explore current understandings of the influence of political rights, among historical legacies, on economic development. We construct variables for selected political regimes for 1811-2010. We find significant association between individual rights and economic growth. We argue that current understanding of political regimes supportive of growth (Acemoglu, etc), should parse the concept of property rights to include the protection of the individual in their focus on private property rights protection, alone, respected in various forms of government, are insufficient; what matters is the security of individuals from arbitrary arrest, regardless of “type of regime”. Discretionary rights of rulers or democratic governments to arrest citizens undermines the protection of private property rights and other attributes classically given to democratic foundations of economic growth, for example, free press, freedom of the exercise of religious belief. We suggest, as a research agenda, that the power of the politically competitive system therefore comes from weakening discretionary authority over law enforcement
    Keywords: rule of law,Rule of Force,Personal Rights,Private Property Protection,Economic Growth
    JEL: P16 P50 N40 O40
    Date: 2014
  10. By: Johannes W. Fedderke and Yang Liu
    Abstract: This paper examines the nature and sources of productivity growth in South African manufacturing sectors, in international comparative perspective. On panel data estimations, we find that the evidence tends to support Schumpeterian explanations of productivity growth for a panel of countries including both developed and developing countries, and a panel of the South African manufacturing sectors. By contrast, for a panel of OECD manufacturing sectors, semi-endogenous productivity growth is supported. However, we also report evidence that suggests that sectors are not homogeneous. For this reason time series evidence may be more reliable than panel data. Time series evidence for South Africa suggests that prospects for the sustained productivity growth associated with Schumpeterian innovation processes, is restricted to a narrow set of sectors, strongly associated with the chemicals and related sectors, machinery and transport equipment, and basic iron and steel sectors. Semi-endogenous growth finds much weaker support. For the OECD manufacturing sectors, both semi-endogenous and Schumpeterian growth finds support, with semi-endogenous growth more prevalent than for South African manufacturing. The sustained productivity growth associated with Schumpeterian growth frameworks is relatively rare everywhere.
    JEL: O47
    Date: 2015
  11. By: Gareth Austin; Ewout Frankema; Ewout Morten Jerven
    Abstract: This paper reviews the Ôlong twentieth-centuryÕ development of ÔmodernÕ manufacturing in Sub-Saharan Africa from colonization to the present. We argue that classifying Africa generically as a Ôlate industrializerÕ is inaccurate. To understand the distinctively African pattern of manufacturing growth, we focus our discussion on the dynamic interplay between the regionÕs specific endowment structures, global economic relationships and government policies. We conclude that the case of Sub-Saharan Africa is best characterized as interrupted industrial growth instead of sustained convergence on world industrial leaders. This is partly because, until very recently, the factor endowments made it very costly for states to pursue industrialization; and partly because successive rulers, colonial and post-colonial, have rarely had both the capacity to adopt and the dedication to sustain policies that modified the regionÕs existing comparative advantage in primary production, by using their fiscal and regulatory powers effectively to promote industrialization.
    Keywords: Manufacturing, Sub-Saharan Africa, Colonial institutions, Economic History
    Date: 2015–11
  12. By: Mauro Boianovsky
    Abstract: The origins of “capital fundamentalism’ – the notion that physical capital accumulation is the primary determinant of economic growth – have been often ascribed to H arrod’s and Domar’s proposition that the rate of growth is the product of the saving rate and of the outpu t - capital ratio. I t is argued here that development planners in the 1950s reinterpreted and adapted the growth formula to their agenda in order to calculate “capital requirements”. Development economists at the time (Lewis, Hirschman, Rostow and others) were aware that Harrod’s and Domar’s growth models addressed economic instability based on Keynesian multiplier analysis, which diff ered from their concern with long - run growth in developing economies. Harrod eventual ly applied his concept of the natural gro wth rate to economic development . He claimed that the growth of developing economies was determined by their ability to implement technical progress – not by capital accumulation, subject to diminishing returns. Dom ar pointed out that the increm ental capital - output ratio was more likely a passive result of the interaction between the propensity to save and technological progress, instead of a causal factor in the determination of growth.
    Keywords: Capital fundament alism, Harrod, Domar, development economics, saving
    JEL: B22 B31 O10
    Date: 2015
  13. By: Allan H. Meltzer; Scott F. Richard
    Abstract: This paper is a positive theory of the distribution of income and the growth rate of the economy. It builds on our earlier work, Meltzer and Richard (1981), on the size of government. How does the distribution of income change as an economy grows? To answer this question we build a model of a labor economy in which consumers have diverse productivity. The government imposes a linear income tax which funds equal per capita redistribution. The tax rate is set in a sequence of single issue election in which the median productivity individual is decisive. Economic growth is the result of using a learning by doing technology, so higher taxes discourage labor causing the growth rate of the economy to fall. The distribution of productivity can widen due to an exogenous increase in technological specialization. This causes voters to raise the equilibrium tax rate and reduce growth. The distribution of pre-tax income widens. We calibrate the model using data from the U.S., U.K. and France. The results of the calibration show that the model is consistent with the facts about changes in income distribution over time in developed countries.
    Date: 2015–04
  14. By: Andrei S. Akhremenko (National Research University Higher School of Economics); Alexander P. Petrov (National Research University Higher School of Economics); Egor A. Yureskul (National Research University Higher School of Economics)
    Abstract: This paper deals with a model of economic growth, which we expand to include endogenous policy switching based on retrospective voting. It is shown that under certain conditions the solution has a special form that we call a cyclically balanced growth path. This type of solution is an analogue to balanced growth paths, which often occur in growth models with constant policies. Cyclically balanced growth paths are investigated analytically, and the growth rate over the cycle has been found. Results of numerical experiments are also provided and possible empirical applications of the model are outlined
    Keywords: differential equations; dynamical model; policy space; democracy; autocracy; economic growth; efficiency; public capital; growth path; retrospective voting
    JEL: C61 H54 O41
    Date: 2015

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