nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒01‒18
thirteen papers chosen by
Marc Klemp
Brown University

  1. Instrumental Variables in the Long Run By Casey, Gregory; Klemp, Marc
  2. Ethnic Diversity and Educational Attainment By Awaworyi Churchill, Sefa; Nuhu, Ahmed Salim
  3. Endogenous Infrastructure Development and Spatial Takeoff By Alex Trew
  4. The Evolution of Gender Gaps in Industrialized Countries By Claudia Olivetti; Barbara Petrongolo
  5. Technical Change, Non-Tariff Barriers, and the Development of the Italian Locomotive Industry, 1850-1913 By Carlo Ciccarelli; Alessandro Nuvolari
  6. A closer look at the long-term patterns of regional income inequality in Spain: The poor stay poor (and stay together) By Daniel A. Tirado Fabregat; Alfonso Díez-Minguela; Julio Martínez-Galarraga
  7. A Vision of the Growth Process in a Technologically Progressive Economy:the United States, 1899-1941. By Bakker, Gerben; Crafts, Nicholas; Woltjer, Pieter
  8. Human Capital and the Quality of Education in a Poverty Trap Model By Maria Emma Santos
  9. Capital shares and income inequality: Evidence from the long run By Erik Bengtsson; Daniel Waldenstršm
  10. Going Up and Down: Rethinking the Empirics of Growth in the Developing and Newly Industrialized World By Francesco Lamperti; Clara Elisabetta Mattei
  11. The Impact of Variations in Institutional Grafting Modes on Economic Growth: A Three-Dimensional Approach By Tamilina, Larysa; Tamilina, Natalya
  12. Growth and Institutions in African Development by Augustin K. Fosu By Asongu, Simplice
  13. Accelerating poverty reduction in a less poor world : the roles of growth and inequality By Olinto, Pedro; Lara Ibarra, Gabriel; Saavedra-Chanduvi, Jaime

  1. By: Casey, Gregory; Klemp, Marc
    Abstract: In the field of long-run economic growth, it is common to use historical or geographical variables as instruments for contemporary endogenous regressors. We study the interpretation of these conventional instrumental variable (IV) regressions in a simple, but general, framework. We are interested in estimating the long-run causal effect of changes in historical conditions. For this purpose, we develop an augmented IV estimator that accounts for the degree of persistence in the endogenous regressor. We apply our results to estimate the long-run effect of institutions on economic performance. Using panel data, we find that institutional characteristics are imperfectly persistent, implying that conventional IV regressions overestimate the long-run causal effect of institutions. When applying our augmented estimator, we find that increasing constraints on executive power from the lowest to the highest level on the standard index increases national income per capita three centuries later by 1.2 standard deviations.
    Keywords: Long-Run Economic Growth, Instrumental Variable Regression
    JEL: C10 C3 C30 O10 O40
    Date: 2016–01–07
  2. By: Awaworyi Churchill, Sefa; Nuhu, Ahmed Salim
    Abstract: This study attempts to explain the effects of ethnic and linguistic diversity on educational attainment. We argue that cross-section differences in ethnic and linguistic fractionalization can explain a substantial part of the cross-country differences in educational attainment levels. Using a data on 86 countries, we uncover new evidence on the relationship between fractionalization and educational attainment. We find that fractionalization lower educational attainment. This finding is consistent across various measures of educational attainment, and is robust to several sensitivity checks. We explore several potential mechanisms which could explain the observed negative effects of ethnic and linguistic diversity including ethnic diversity’s effect on social capital, discrimination, public goods, conflicts, and institutional quality, among others.
    Keywords: ethnic diversity,fractionalization,educational attainment,schooling
    JEL: J15 O5 H52 I21
    Date: 2015–12
  3. By: Alex Trew (University of St Andrews)
    Abstract: Infrastructure development can affect the spatial distribution of economic activity and, by consequence, aggregate structural transformation and growth. The growth of trade and specialization of regions, in turn, affects the demand for infrastructure. This paper develops a model in which the evolution of the transport sector occurs alongside the growth in trade and output of agricultural and manufacturing firms. Simulation output captures aspects of the historical record of England and Wales over c.1710-1881. A number of counterfactuals demonstrate the role that the timing and spatial distribution of infrastructure development plays in determining the timing and pace of takeoff.
    Keywords: Industrial revolution, growth, transport, spatial development.
    JEL: H54 O11 O18 O33 N13 N93 R12
  4. By: Claudia Olivetti (Boston College; NBER); Barbara Petrongolo (Queen Mary University; Centre for Economic Performance, LSE)
    Abstract: Women in developed economies have made major inroads in labor markets throughout the past century, but remaining gender differences in pay and employment seem remarkably persistent. This paper documents long-run trends in female employment, working hours and relative wages for a wide cross-section of developed economies. It reviews existing work on the factors driving gender convergence, and novel perspectives on remaining gender gaps. The paper finally emphasizes the interplay between gender trends and the evolution of the industry structure. Based on a shift-share decomposition, it shows that the growth in the service share can explain at least half of the overall variation in female hours, both over time and across countries.
    Keywords: gender gaps, demand and supply, industry structure
    JEL: E24 J16 J31
    Date: 2016–01–01
  5. By: Carlo Ciccarelli; Alessandro Nuvolari
    Abstract: This paper examines the dynamics of technical change in the Italian locomotive industry in the period 1850-1913. From an historical point of view, this industry presents a major point of interest: it was one of the few relatively sophisticated "high-tech" sectors in which Italy, a latecomer country, was able to set foot firmly before 1913. Using technical data on the performance of different vintages of locomotives, we construct a new industry-level index of technical change. Our reassessment reveals the critical role played by non-tariff barriers for the emergence and consolidation of national manufacturers in this field.
    Date: 2014–02–12
  6. By: Daniel A. Tirado Fabregat (Dpto. Análisis Económico); Alfonso Díez-Minguela (Dpto. Análisis Económico); Julio Martínez-Galarraga (Dpto. Análisis Económico)
    Abstract: Using a novel dataset, this paper explores the evolution of regional income inequality in Spain, 1860-2010. We follow the growth literature and use spatial exploratory tools to analyse modality, mobility and spatial clustering. We find two clearly distinguishable periods. First, there was an upswing in regional inequality accompanied by a certain mobility between 1860 and 1930. This was followed by a period of regional convergence, in which mobility was rather low. In parallel to this, a geographical concentration of the richest and poorest regions took place, with wealthy Spain located in the north-east and poor Spain in the south. In the last decades convergence has come to a halt, mobility is quasi-non-existent and spatial polarization has tended to increase. A partir de recientes estimaciones históricas de PIB provincial, este trabajo explora la evolución de la desigualdad regional en España entre 1860 y 2010. Siguiendo a la literatura de crecimiento económico, se presentan diversos indicadores para analizar la modalidad, la movilidad y la aglomeración espacial de las provincias españolas. Nuestros resultados muestran la existencia de dos períodos claramente diferenciados. En primer lugar, entre 1860 y 1930 la desigualdad regional aumentó y este aumento se vio acompañado de una cierta movilidad en el ranking provincial. A partir de entonces se dio un proceso de convergencia, en el que la movilidad fue bastante reducida, y donde además se produjo una creciente concentración geográfica de las provincias más ricas y más pobres, situándose las primeras en el noreste peninsular y las segundas en el sur. En las últimas décadas el proceso de convergencia se ha detenido, la movilidad es prácticamente inexistente y la polarización espacial ha continuado aumentando.
    Keywords: Desigualdad regional, España, crecimiento regional, historia económica Regional inequality, Spain, Regional growth, Economic history
    JEL: C21 O18 R0 N9 N64 F14
    Date: 2015–12
  7. By: Bakker, Gerben (London School of Economics); Crafts, Nicholas (Department of Economics University of Warwick); Woltjer, Pieter (Wageningen University)
    Abstract: We develop new aggregate and sectoral Total Factor Productivity (TFP) estimates for the United States between 1899 and 1941 through better coverage of sectors and better measured labor quality, and show TFP-growth was lower than previously thought, broadly based across sectors, strongly variant intertemporally, and consistent with many diverse sources of innovation. We then test and reject three prominent claims. First, the 1930s did not have the highest TFP-growth of the twentieth century. Second, TFP-growth was not predominantly caused by four leading sectors. Third, TFP-growth was not caused by a ‘yeast process’ originating in a dominant technology such as electricity.
    Keywords: Harberger diagram ; mushrooms ; productivity growth ; total factor productivity ; yeast
    JEL: N11 N12 O47 O51
    Date: 2015
  8. By: Maria Emma Santos
    Abstract: This paper presents a model of a poverty trap that is caused by an unequal initial income and human capital distribution, and differences in the quality of education between children from the more and less advantaged social sectors. Under certain conditions, the economy converges to a situation with three stable and simultaneous equilibria, two of which constitute poverty traps, lowering the economy’s current and steady-state aggregate output level as well as its growth rate. The model suggests that a policy oriented to equalizing the quality of education would, in the long run, have potential in reducing initial inequalities. Creation-Date: 2009-08
  9. By: Erik Bengtsson (Lund University); Daniel Waldenstršm (Uppsala University)
    Abstract: This paper investigates the relationship between the capital share in national income and personal income inequality over the long run. Using a new historical cross-country database on capital shares in 19 countries and data from the World Wealth and Income Database, we find strong long-run links between the aggregate role of capital in the economy and the size distribution of income. Over time, this dependence varies; it was strong both before the Second World War and in the early interwar era, but has grown to its highest levels in the period since 1980. The correlation is particularly strong in Anglo-Saxon and Nordic countries, in the very top of the distribution and when we only consider top capital incomes. Replacing top income shares with a broader measure of inequality (Gini coefficient), the positive relationship remains but becomes somewhat weaker.
    Keywords: Wage share, Top incomes, Inequality, Wealth, Economic history
    JEL: D30 N30
    Date: 2016–01
  10. By: Francesco Lamperti; Clara Elisabetta Mattei
    Abstract: Growth dynamics are remarkably heterogeneous, in particular when one focuses on developing countries. Economic miracles and failures are embedded within extended phases of either growth or decline. We propose a methodology and a taxonomy that will characterize countries' growth patterns on the basis of the sequence of regimes they experience. In particular, we emphasize the difference between expansionary and recessionary regimes and, after classifying the growth pattern of all 123 developing countries in our dataset, we explore cross-sectional empirical regularities which emerge during upward and downward growth phases. Results show that expansionary regimes are associated with convergence and positive correlation between growth and (short run) volatility. On the contrary, in recessionary regimes, poorer countries face deeper failures and a negative correlation between growth and volatility is found, signifying that output fluctuates less around the trend during strong rather than mild recessions. Finally, we discover that regimes of growth and recession show similar average length (about 16 years). Although recessions on average are remarkably pronounced (14% loss), during expansions the magnitude of growth is much larger.
    Keywords: growth, structural breaks, expansionary and recessionary regimes, convergence
    Date: 2016–01–13
  11. By: Tamilina, Larysa; Tamilina, Natalya
    Abstract: This article explains the peculiarities of institutional effects on growth rates in post-communist countries. By proposing a certain dependence of the institution-growth nexus on the mode of institutional grafting, the distinction between drift-phase and path-breaking institutional change is introduced. Theoretical juxtapositions show that transition countries’ institutions built through path-breaking institutional reforms differ from those that emerge evolutionarily in the drift phase in a twofold manner in their relationship to growth. Growth rates of their economies are less likely to depend on the quality of legal institutions and are more likely to be a function of the maturity of political institutions. In addition, legal institutional change in the post-communist world is a product of the quality of the political environment to a greater extent than their drift-phase alternatives. These propositions are tested empirically based on a sample of 87 countries derived from the POLITY IV Project's website.
    Keywords: institutional economics, formal institutions, institutional change, post-communist transition
    JEL: K40 O10 O17
    Date: 2015–04–16
  12. By: Asongu, Simplice
    Abstract: Augustin K. Fosu, a leading and respected expert in the field of African development has edited an interesting bulk of studies in a book entitled: Growth and Institutions in African Development. The book is a timely contribution to knowledge that offers very interesting insights into views and agenda within rigorous theoretical and empirical frameworks on policy issues surrounding the relevance of growth and institutions in African development. The book’s coverage comprises of 15 chapters presented into two main subject areas, namely: growth and institutions. Each of the two subjects is further divided into two parts. On the one hand, the growth area covers: (i) growth determinants (industrial embeddedness, innovation, exchange-rate regimes and environmental quality); and (ii) sectors, dynamics and distribution of growth. On the other hand, the institutions area entails: (i) institutional development; and (ii) institutions and development outcomes. An interesting common denominator among authors of various chapters in the two subject areas is that the empirical results are succinctly summarised to enhance accessibility and readability by interested readers who might have required technical reading skills to understand the rigorous empirical analyses and resulting policy insights. Hence, it is an easy-to-read and richly policy-relevant book for both specialists and non-specialists. Moreover, the underlying ease of readership is facilitated with an introductory chapter by Augustin K. Fosu which lays out the general framework with hard but interesting stylized facts, before summarising the key motivations and contributions of various chapters with very accessible and non-technical language. This is a critical review of the book.
    Keywords: Growth; Institutions; Development; Africa
    JEL: O1 O17 O5
    Date: 2015–09
  13. By: Olinto, Pedro; Lara Ibarra, Gabriel; Saavedra-Chanduvi, Jaime
    Abstract: This paper re-examines the roles of changes in income and inequality in poverty reduction. The study provides estimates of the relative effects of inequality reduction versus growth promotion in reducing poverty for countries with different levels of initial poverty. The analysis uses country panel-data for 1980-2010. The results indicate that, as countries become less poor, inequality-reducing policies are likely to become relatively more effective for poverty reduction than growth-promoting policies. The results indicate that the growth elasticity of poverty reduction either increases or remains constant with the level of initial poverty. Nevertheless, the results also strongly indicate that, as poverty declines, the inequality elasticity of poverty reduction increases faster. Therefore, if the marginal cost of reducing inequality relative to the marginal cost of increasing growth does not increase with lower poverty levels, to accelerate poverty reduction, greater emphasis should be given to equity rather than growth as countries attain higher levels of development.
    Keywords: Achieving Shared Growth,Regional Economic Development,Rural Poverty Reduction,Inequality,Services&Transfers to Poor
    Date: 2014–05–01

This nep-gro issue is ©2016 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.
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