nep-gro New Economics Papers
on Economic Growth
Issue of 2015‒12‒28
fifteen papers chosen by
Marc Klemp
Brown University

  1. The Evolution of Culture and Institutions: Evidence from the Kuba Kingdom By Sara Lowes; Nathan Nunn; James A. Robinson; Jonathan Weigel
  2. Stages of Diversification: France, 1836-1938 By Stéphane Becuwe; Bertrand Blancheton; Christopher M. Meissner
  3. How Strong are Ethnic Preferences? By Lars Ivar Oppedal Berge; Kjetil Bjorvatn; Simon Galle; Edward Miguel; Daniel N. Posner; Bertil Tungodden; Kelly Zhang
  4. Buy, Keep or Sell: Economic Growth and the Market for Ideas By Ufuk Akcigit; Murat Alp Celik; Jeremy Greenwood
  5. The Dynamics of Comparative Advantage By Gordon H. Hanson; Nelson Lind; Marc-Andreas Muendler
  6. Firm Dynamics in the Neoclassical Growth Model By Omar Licandro
  7. Historical Origins of a Major Killer: Cardiovascular Disease in the American South By Richard H. Steckel; Garrett Senney
  8. The vanishing effect of finance on growth By Gründler, Klaus
  9. Economic Gains for U.S. States from Educational Reform By Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
  10. Public debt and economic growth: Economic systems matter By Ahlborn, Markus; Schweickert, Rainer
  11. Immigration, Human Capital Formation and Endogenous Economic Growth By Isaac Ehrlich; Jinyoung Kim
  12. Path dependence and induced innovation By Karsten Wasiluk
  13. On discounting and voting in a simple growth model By Borissov, Kirill; Pakhnin, Mikhail; Puppe, Clemens
  14. Immigrants and Gender Roles: Assimilation vs. Culture By Francine D. Blau
  15. A Simulation Model of the Effect of Fertility Reduction on Economic Growth in Africa By Mahesh Karra; David Canning; Joshua Wilde

  1. By: Sara Lowes; Nathan Nunn; James A. Robinson; Jonathan Weigel
    Abstract: We use variation in historical state centralization to examine the impact of institutions on cultural norms. The Kuba Kingdom, established in Central Africa in the early 17th century by King Shyaam, had more developed state institutions than the other independent villages and chieftaincies in the region. It had an unwritten constitution, separation of political powers, a judicial system with courts and juries, a police force and military, taxation, and significant public goods provision. Comparing individuals from the Kuba Kingdom to those from just outside the Kingdom, we find that centralized formal institutions are associated with weaker norms of rule-following and a greater propensity to cheat for material gain.
    JEL: D03 N47
    Date: 2015–12
  2. By: Stéphane Becuwe; Bertrand Blancheton; Christopher M. Meissner
    Abstract: A large literature has documented an association between economic growth and export diversification. We study this question in France between 1836 and 1938. The period witnessed the onset of modern economic growth and sharp changes in the level of international competition. We use a new long term database on French foreign trade at a high level of disaggregation. At the dawn of the first Globalization, France appears to have specialized along Ricardian lines, exporting a handful of textile products in large quantities. There is a decrease in specialization from 1860 to World War I along the lines of modern studies. Changes in trade costs along with economic growth help explain the evolution of France’s comparative advantage. The decline of export concentration is associated with a chronic deficit in the balance of trade during the Belle Époque and the major part of the interwar period particularly after 1927.
    JEL: N23 N73
    Date: 2015–12
  3. By: Lars Ivar Oppedal Berge; Kjetil Bjorvatn; Simon Galle; Edward Miguel; Daniel N. Posner; Bertil Tungodden; Kelly Zhang
    Abstract: Ethnic divisions have been shown to adversely affect economic performance and political stability, especially in Africa, but the underlying reasons remain contested, with multiple mechanisms potentially playing a role. We utilize lab experiments to isolate the role of one such mechanism—ethnic preferences—which have been central in both theory and in the conventional wisdom about the impact of ethnic differences. We employ an unusually rich research design, collecting multiple rounds of experimental data with a large sample of 1,300 subjects in Nairobi; employing within-lab priming conditions; and utilizing both standard and novel experimental measures, including implicit association tests. The econometric approach was pre-specified in a registered pre-analysis plan. Most of our tests yield no evidence of coethnic bias. The results run strongly against the common presumption of extensive ethnic bias among ordinary Kenyans, and suggest that other mechanisms may be more important in explaining the negative association between ethnic diversity and economic and political outcomes.
    JEL: C90 H41 O43
    Date: 2015–11
  4. By: Ufuk Akcigit (University of Chicago and NBER); Murat Alp Celik (University of Pennsylvania); Jeremy Greenwood (University of Pennsylvania and NBER)
    Date: 2015–12
  5. By: Gordon H. Hanson; Nelson Lind; Marc-Andreas Muendler
    Abstract: This paper characterizes the dynamic empirical properties of country export capabilities in order to inform modelling of the long-run behavior of comparative advantage. The starting point for our analysis is two strong empirical regularities in international trade that have previously been studied incompletely and in isolation to one another. The literature has noted a tendency for countries to concentrate exports in a few sectors. We show that this concentration arises from a heavy-tailed distribution of industry export capabilities that is approximately log normal and whose shape is stable across countries, sectors, and time. Likewise, previous research has detected a tendency for mean reversion in national industry productivities. We establish that mean reversion in export capability, rather than indicative of convergence in productivities or degeneracy in comparative advantage, is instead consistent with a well behaved stochastic growth process that delivers a stationary distribution of country export advantage. In literature on the growth of cities and firms, economists have used stochastic processes to study the determinants of the long-run size distributions. Our contribution is to develop an analogous empirical framework for identifying the parameters that govern the stationary distribution of export capability. The main result of this analysis is that a generalized gamma distribution, which nests many commonly studied distributions, provides a tight fit of the data but log normality offers a reasonable approximation. Importantly, the stochastic process that generates log normality can be estimated in its discretized form by simple linear regression. Log linearity allows for an extension of our approach to multivariate diffusions, in which one can permit innovations to productivity to be transmitted intersectorally and internationally, as in recent models of trade and growth.
    JEL: F14
    Date: 2015–11
  6. By: Omar Licandro
    Abstract: This paper integrates firm dynamics theory into the Neoclassical growth framework. It embeds selection into an otherwise standard dynamic general equilibrium model of one good, two production factors (capital and labor) and competitive markets. Selection relies on firm specific investment: i) capital is a fixed production factor {an entry cost, ii) the productivity of capital is firm specific, but observed after investment, iii) firm specific capital is partially reversible {its opportunity cost plays the same role as fixed production costs. At equilibrium, aggregate technology is Neoclassical, but TFP is endogenous and positively related to selection; capital depreciation positively depends on selection too, due to capital irreversibility. The Neoclassical model is the limit case of homogeneous firms. At steady state, output per capita and welfare both raise with selection. Rendering capital more reversible or increasing the variance of the idiosyncratic shock both raise selection, productivity, output per capita and welfare.
    Keywords: Firm dynamics, Selection, Neoclassical Growth model, Scrapping, Capital irreversibility
    Date: 2015
  7. By: Richard H. Steckel; Garrett Senney
    Abstract: When building major organs the fetus responds to signals via the placenta that forecast post-natal nutrition. A mismatch between expectations and reality creates physiological stress and elevates several noninfectious chronic diseases. Applying this concept, we investigate the historical origins of cardiovascular disease (CVD) in the American South using rapid income growth from 1950 to 1980 as a proxy for socioeconomic forces that created unbalanced physical growth among southern children born after WWII. Using state-level data on income growth, smoking, obesity and education, we explain over 70% of the variance in current CVD mortality rates across the country.
    JEL: I15 N32
    Date: 2015–12
  8. By: Gründler, Klaus
    Abstract: This paper investigates the causes of the "vanishing effect of finance" detected in recent studies. The results highlight that the negative effect of the financial system on growth is mainly driven by advanced economies, whereas finance is still beneficial for income increases in developing countries. The reason is that finance and growth are associated via a nonlinear relationship, which is due to a fundamental change in the transmission mechanism of finance across different levels of economic and financial development. In early stages of development, finance fosters entrepreneurship, education, and investment in physical capital. As the economies develop, this positive influence vanishes. The negative effect of finance is stronger in countries with sophisticated public education systems, low levels of income inequality, as well as low fertility rates, and in times with low factor productivity growth.
    Keywords: Economic Growth,Financial Sector,Panel Data
    JEL: F40 O16 O47
    Date: 2015
  9. By: Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
    Abstract: There is limited existing evidence justifying the economic case for state education policy. Using newly-developed measures of the human capital of each state that allow for internal migration and foreign immigration, we estimate growth regressions that incorporate worker skills. We find that educational achievement strongly predicts economic growth across U.S. states over the past four decades. Based on projections from our growth models, we show the enormous scope for state economic development through improving the quality of schools. While we consider the impact for each state of a range of educational reforms, an improvement that moves each state to the best-performing state would in the aggregate yield a present value of long-run economic gains of over four times current GDP.
    JEL: I21 J24 O47
    Date: 2015–12
  10. By: Ahlborn, Markus; Schweickert, Rainer
    Abstract: Most studies on the relationship between public debt and economic growth implicity assume homegenous debt effects across their samples. We - in accordance with recent literature - challenge this view and state that there likely is a great deal of cross-country heterogeneity in that relationship. However, other than scholars assuming that all countries are different, we expect that clusters of countries differ. We identify three country clusters with distinct economic systems: Liberal (Anglo Saxon), Continental (Core EU members) and Nordic (Scandinacian). We argue that different degrees of fiscal uncertainty at comparable levels of public debt between those economic systems constitute a major source of hetergeneity in the debt-growth relationship. Our empirical evidence supports this assumption. Continental countries face more growth reducing public debt effects than especially Liberal countries. There, public debt apparently exerts neutral or even positive growth effects, whil for Nordic countries a non-linear relationship is discovered, with negative debt effects kicking in at public debt values of around 60% of GDP.
    Keywords: Public Debt,Economic Growth,Economic Systems,Fiscal Policy,Welfare State
    JEL: E62 P10 P51 H10
    Date: 2015
  11. By: Isaac Ehrlich; Jinyoung Kim
    Abstract: Census data from international sources covering 77% of the world’s migrant population indicate that the skill composition of migrants in major destination countries, including the US, has been rising over the last 4 decades. Moreover, the population share of skilled migrants has been approaching or exceeding that of skilled natives. We offer theoretical propositions and empirical tests consistent with these trends via a general-equilibrium model of endogenous growth where human capital, population, income growth and distribution, and migration trends are endogenous. We derive new insights about the impact of migration on long-term income growth and distribution, and the net benefits to natives in both destination and source countries.
    JEL: F22 F43 O15 O4
    Date: 2015–11
  12. By: Karsten Wasiluk (Department of Economics, University of Konstanz, Germany)
    Abstract: This paper presents an endogenous growth model that captures the origins of path dependence and technological lock-in and introduces a mechanism of induced innovation, which can trigger new research. Imperfect spillovers of secondary development can make the development of new technologies unattractive until research ceases in the long run. Changes in the relative supply of primary factors act as a stimulus for research as new technologies are better suited for the new environment. A simulation using changes of crude oil prices in the US shows the quantitative significance of the model's implications. The model is able to explain long waves of economic development where growth cycles are triggered by changes in the relative factor supply. It also provides a new rationale for governmental regulations such as Pigouvian taxes and pollution permits as they can stimulate innovation and provide the base for the development of "green" technologies.
    Keywords: Path Dependence, Induced Innovation, Directed Technological Change, Growth Cycles
    JEL: O30 O31 O33 O44
    Date: 2015–04–21
  13. By: Borissov, Kirill; Pakhnin, Mikhail; Puppe, Clemens
    Abstract: In dynamic resource allocation models, the non-existence of voting equilibria is a generic phenomenon due to the multi-dimensionality of the choice space even with agents heterogeneous only in their discount factors. Nevertheless, at each point of time there may exist a "median voter" whose preferred instantaneous consumption rate is supported by a majority of agents. Based on this observation, we propose an institutional setup ("intertemporal majority voting") in a Ramsey-type growth model with common consumption and heterogeneous agents, and show that it provides a microfoundation of the choice of the optimal consumption stream of the median agent. While the corresponding intertemporal consumption stream is in general not a Condorcet winner among all feasible paths, its induced instantaneous consumption rate receives a majority at each point in time in the proposed intertemporal majority voting procedure. We also provide a characterization of balanced-growth and steady-state voting equilibria in the case in which agents may differ not only in their time preference, but also in their instantaneous utility functions.
    Keywords: collective choice,common-pool resource,economic growth,heterogeneous agents,median voter theorem
    JEL: D11 D71 D91 O13 O43
    Date: 2015
  14. By: Francine D. Blau
    Abstract: This paper examines evidence on the role of assimilation versus source country culture in influencing immigrant women’s behavior in the United States—looking both over time with immigrants’ residence in the United States and across immigrant generations. It focuses particularly on labor supply but, for the second generation, also examines fertility and education. We find considerable evidence that immigrant source country gender roles influence immigrant and second generation women’s behavior in the United States. This conclusion is robust to various efforts to rule out the effect of other unobservables and to distinguish the effect of culture from that of social capital. These results support a growing literature that suggests that culture matters for economic behavior. At the same time, the results suggest considerable evidence of assimilation of immigrants. Immigrant women narrow the labor supply gap with native-born women with time in the United States, and, while our results suggest an important role for intergenerational transmission, they also indicate considerable convergence of immigrants to native levels of schooling, fertility, and labor supply across generations.
    JEL: J13 J16 J22 J24 J61
    Date: 2015–11
  15. By: Mahesh Karra (Department of Global Health and Population, Harvard School of Public Health); David Canning (Department of Global Health and Population, Harvard School of Public Health); Joshua Wilde (Department of Economics, University of South Florida)
    Abstract: We investigate the effects of a decline in fertility on economic growth and development outcomes using a macrosimulation model. We incorporate three fertility effects that have previously not been included in such models: the effect of fertility on child health and later worker productivity; the effect of fertility on savings; and a feedback mechanism from female education to fertility, in which changes in female education that are induced by declining fertility in turn alter subsequent fertility. We also improve the model of the economy by incorporating a more realistic three-sector framework and by allowing for labor market imperfections. Using data from Nigeria, we find that adding these channels roughly doubles the effect of an initial fertility decline on income per capita after 50 years when compared to previous simulation results.
    Keywords: Fertility, Family Planning, Economic Growth, Macrosimulation
    JEL: I15 I18 J11 J13 O11
    Date: 2015–12

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