nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒01‒29
sixteen papers chosen by
Marc Klemp
Brown University

  1. The Great Divergence Revisited: Industrialization, Inequality and Political Conflict in the Unified Growth Model By Dmitriy Veselov; Alexander Yarkin
  2. Natural Resources and Economic Growth: A Meta-Analysis By Tomas Havranek; Roman Horvath; Ayaz Zeynalov
  3. Modelling Education Dynamics with Cliometric Foundations. By Claude Diebolt
  4. Do Mature Economies Grow Exponentially? By Steffen Lange; Peter P\"utz; Thomas Kopp
  5. Territorial capital and Polish regional development. A neoclassical approach By Tomasz Brodzicki; Dorota Ciołek
  6. Climate, Technological Change and Economic Growth By George Adu and Paul Alagidede
  7. On the Comparative Advantage of U.S. Manufacturing: Evidence from the Shale Gas Revolution By Arezki, Rabah; Fetzer, Thiemo
  8. The Impact of the Mining Boom in Colombia: the case of the gold By Jorge Barrientos Marín; Sebastián Ramírez; Elkin Tabares
  9. Conflict, Economic Growth and Spillover Effects in Africa By John Paul Dunne and Nan Tian
  10. Does Dutch Disease Hit Mongolia? By Ge, Wei; Kinnucan, Henry
  11. Investing in Health: A Macroeconomic Exploration of Short-Run and Long-Run Trade-Offs By Junying Zhao; William Scarth; Jeremiah Hurley
  12. The Effects of Barriers to Technology Adoption on Japanese Prewar and Postwar Economic Growth By Daisuke Ikeda; Yasuko Morita
  13. Violent Conflicts and Economic Performance of the Manufacturing Sector in India By Takahiro Sato; Atsushi Kato
  14. Indian Agricultural Growth- A Spatial Perspective By Chatterjee, Tirtha
  15. Private Wealth in a Developing Country: A South African Perspective on Piketty By Anna Orthofer
  16. The strong porter hypothesis in an endogenous growth model with satisficing managers By Dominique Bianco; Evens Salies

  1. By: Dmitriy Veselov (National Research University Higher School of Economics); Alexander Yarkin (National Research University Higher School of Economics)
    Abstract: This paper studies the impact of inequality in capital and land distribution on the pace of industrialization, thereby explaining the role of wealth inequality in the Great Divergence phenomenon. We build a two-sector unified growth model, in which the outcome of public policy contest between the supporters and opponents of modern sector development determines the pace of industrialization. The distribution of wealth affects the incentives of agents to invest in political conflict, and hence influences the probability of pro-growth policies. We show that while higher inequality in land distribution hampers modern sector development, higher inequality in capital within landless agents is growth enhancing. The strength of the latter effect increases with the amount of accumulated capital. The model also captures the hump-shaped path of conflict intensity observed throughout the industrialization phase. We present several historical narratives that support these results
    Keywords: unified growth, public policy contest, endogenous institutions, industrialization, inequality
    JEL: D72 D74 N10 O14 O41 O43
    Date: 2015
  2. By: Tomas Havranek (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; Czech National Bank); Roman Horvath (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic); Ayaz Zeynalov (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: An important question in development studies is how abundance of natural resources affects long-term economic growth. No consensus answer, however, has yet emerged, with approximately 40% of empirical papers finding a negative effect, 40% finding no effect, and 20% finding a positive effect. Does the literature taken together imply the existence of the so-called natural resource curse? In a quantitative survey of 402 estimates reported in 33 studies, we find that overall support for the resource curse hypothesis is weak when potential publication bias and method heterogeneity are taken into account. Our results also suggest that three aspects of study design are especially effective in explaining the differences in results across studies: 1) including an interaction between natural resources and institutional quality, 2) controlling for the level of investment activity, and 3) distinguishing between different types of natural resources.
    Keywords: Natural resources, economic growth, institutions, publi- cation selection bias, meta-analysis
    JEL: Q30 O13 C51
    Date: 2016–01
  3. By: Claude Diebolt
    Abstract: The numerous analogies in the literature on economics between monetary theory and education policy lead me to propose a new model inspired by the work of Dornbusch [1976] and transposed to a context of ‘diploma inflation’. Supposing the required job skills rigid in the short run, I show a significant over-education phenomenon and an overshooting of the wage penalties in starting jobs. After formal education has been completed, the new graduate cohorts, despite a more significant level of initial training and better salary prospects have to face, paradoxically and in comparison with the previous generations, a higher over-education extent over a long period.
    Keywords: Overshooting; Over-education; Education Economics; Economic Policy, Political Economy, Macroeconomic Dynamics, Cliometrics.
    JEL: D31 I20 J31 N3
    Date: 2015
  4. By: Steffen Lange; Peter P\"utz; Thomas Kopp
    Abstract: Most models that try to explain economic growth indicate exponential growth paths. In recent years, however, a lively discussion has emerged considering the validity of this notion. In the empirical literature dealing with drivers of economic growth, the majority of articles is based upon an implicit assumption of exponential growth. Few scholarly articles have addressed this issue so far. In order to shed light on this issue, we estimate autoregressive integrated moving average time series models based on Gross Domestic Product Per Capita data for 18 mature economies from 1960 to 2013. We compare the adequacy of linear and exponential growth models and conduct several robustness checks. Our fndings cast doubts on the widespread belief of exponential growth and suggest a deeper discussion on alternative economic grow theories.
    Date: 2016–01
  5. By: Tomasz Brodzicki (University of Gdansk, Faculty of Economics, Gdańsk, Poland; Institute for Development, Sopot, Poland); Dorota Ciołek (Institute for Development, Sopot, Poland; University of Gdansk, Faculty of Economics, Department of Macroeconomics, Gdańsk, Poland)
    Abstract: The interaction between space (location) and the processes of accumulation (growth) is one of the most interesting and at the same time the most difficult areas of modern economic theory. The theoretical and empirical results to date are however largely unsatisfactory. In our analysis we proposed the way how to implement the space into the neoclassical Solow-Swan growth model. Territorial capital, as a specific carrier of the concept of territorial cohesion, is significantly different from the classical factors of production such as physical capital or labor input. It cannot be considered as a factor directly responsible for changes in the volume of production. However, territorial capital can have an impact on the productivity of basic factors of production such as capital and labor. Thus, when defining the function of production, we assume that territorial capital does not affect production directly, but it affects total factor productivity (TFP) indirectly, contributing to an increase in the production. In this paper we present our research findings on the contribution of various elements of territorial capital to regional growth in Poland. The study adopts a highly spatially disaggregated NUTS-4 level, i.e. counties, for which interactions and relationships of a spatial and territorial nature are particularly relevant.
    Keywords: regional development, TFP determinants, territorial capital, spatial econometrics
    JEL: O40 O47 R11 R12 C31
    Date: 2015–08
  6. By: George Adu and Paul Alagidede
    Abstract: This paper investigates the incentive for developing adaptation technology in a world with changing climate within the directed technical change framework. Consistent with the market size effect, we show that technological change will tend to be biased in favour of the sector that employs the greater share of the work force over time, when the inputs are sufficiently substitutable. An economy with dominant climate sensitive sector can maintain sustained economic growth if it is capable of undertaking frontier innovations in the form of adaptation technology that increases the productivity of the inputs employed in the climate sensitive sector.
    Keywords: climate change, Climate sensitive sector, economic growth, Technological change
    JEL: O31 O32 O33 O44 Q55
    Date: 2016
  7. By: Arezki, Rabah (International Monetary Fund); Fetzer, Thiemo (Department of Economics, University of Warwick)
    Abstract: This paper provides the first empirical evidence of the newly found comparative advantage of the United States manufacturing sector following the so-called shale gas revolution. The revolution has led to (very) large and persistent differences in the price of natural gas between the United States and the rest of the world owing to the physics of natural gas. Results show that U.S. manufacturing exports have grown by about 6 percent on account of their energy intensity since the onset of the shale revolution. We also document that the U.S. shale revolution is operating both at the intensive and extensive margins.
    JEL: Q33 O13 N52 R11
    Date: 2016
  8. By: Jorge Barrientos Marín (Universidad de Antioquia); Sebastián Ramírez (Universidad Autónoma Latinoamericana-UNAULA); Elkin Tabares (Universidad Autónoma Latinoamericana-UNAULA)
    Abstract: To degree to which communities have benefited from natural resource or commodity booms from mining, has been a topic that has elicited interest from a broad spectrum researchers. In this paper we are interested in investigating the local impact of mining activity, specifically related to gold, on several socio-economic population indicators in Colombia. By performing several statistical procedures, we find evidence that before the gold boom, the producing municipalities had life standard indicators which, on average, were similar to other municipalities that did not experience the mining boom. Our estimates suggest that the effect of the gold boom have had questionable impact on the socio-economic indicators like MPI and UBN
    Keywords: gold-mining, impact, spatial-spillover, socio economic indicators, treatment and control
    JEL: C1 C5 C52 O1 Q3
    Date: 2016
  9. By: John Paul Dunne and Nan Tian
    Abstract: While there is a large empirical literature on the determinants of conflict, much less attention has been given to its economic effects and even less to the spillover effects it can have on neighbours. This paper considers the economic effects of conflict for a panel of African countries and develops an approach to calculating the spillovers that moves beyond simply using geographical distance measures and incorporates economic and political differences. The initial empirical results suggest that conflict has a strong negative spillover effect on directly contiguous countries' growth, but no significant impacts were observed on non-contiguous countries. When economic and political factors are considered, this result remains, but the spillover effect is smaller. This implies that it is important to take such factors into account. While the impact of conflict remains devastating, studies that use only geographical distance measures may have been overestimating the impact on neighbours.
    Keywords: Conflict; Economic Growth; Spillovers
    JEL: C21 F21 H56 O11
    Date: 2015
  10. By: Ge, Wei; Kinnucan, Henry
    Abstract: Mongolia is a comparatively small country in the world and the limited domestic demand makes it rely on the trade with other countries. In recent years, Mongolia’s extensive mineral deposits and attendant growth in mining-sector activities have transformed Mongolia’s economy which traditionally has been dependent on herding and agriculture. An equilibrium displacement model based on the macro-economy conditions in Mongolia is conducted to test whether the development of the mining sector has come at the expense of the agricultural sector, as suggested by the “Dutch Disease” hypothesis. Base on the classic economic model developed by Corden and Neary (1982) to describe Dutch Disease: in an open small economy (Mongolia), the booming tradable sector (mining) would suppress the lagging or non-booming sector (agriculture). How the booming mining industry affects the traditional agriculture industry (including grazing) is the main point of this paper.
    Keywords: Dutch disease, agriculture, mining, Mongolia, International Relations/Trade, Resource /Energy Economics and Policy,
    Date: 2016
  11. By: Junying Zhao; William Scarth; Jeremiah Hurley
    Abstract: This paper aims to unravel the competing effects of the health investment. It explores, both analytically and numerically, the equilibrium shift and transitional dynamics after a one-time policy of health investment. We find that such a policy improves health status in the long run, but harms economic growth in both short and long term. The relative sizes of these competing effects depend on the specific health parameters. Within the plausible range for the value of health relative to consumption, households gain welfare in the long run as long as the eectiveness of labor in health production is large. The expanded health sector policy makes households worse off only if labor is rather unproductive in producing health and households value health relatively little. The findings challenge the policy recommendations of the World Bank (1993) and World Health Organization (2001) in that good health increases neither the productivity of workers nor the economic growth rate. It is hoped that the relative simplicity of our model, compared to the existing theoretical literature, can help close the gap between formal academic work on this topic and actual debates among policy makers in both developed and developing countries.
    Keywords: health capital, health investment, endogenous growth, dynamic system, transitional dynamics
    JEL: E2 E6 O4 I1
    Date: 2015–12
  12. By: Daisuke Ikeda (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (currently Financial System and Bank Examination Department, E-mail:; Yasuko Morita (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan@(E-mail:
    Abstract: Following the start of modern economic growth around the mid- 1880s, Japanfs economy continued to substantially lag behind leading economies before World War II, but achieved rapid catch-up after the war. To explain the patterns, we build a dynamic model and examine the role of barriers to technology adoption. We find such barriers hampered catch-up in the prewar period and explain about 40 percent of the postwar miracle. Taking a historical perspective, we argue that factors that acted as barriers include low capacity to absorb technology, economic and political frictions with the outside world, and a lack of competition.
    Keywords: Japan, Barriers to technology adoption, Investment specific technology, Catch-up, Postwar miracle
    JEL: N15 N75 O11 O41
    Date: 2016–01
  13. By: Takahiro Sato (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Atsushi Kato (School of Business, Aoyama Gakuin University)
    Abstract: We investigate the effects of violent conflicts on the economic performance of manufacturing sector of Indian regional states. The number of violent conflicts, the number of deaths and the number of participants in violent conflicts all have negative impacts on gross value added and capital labor ratio of manufacturing sector. Among violent conflicts, ethnic and religious conflicts, as well as those nested in a large conflict have significantly negative impacts.
    Keywords: Violent conflict, Gross value added, Capital labor ratio, Ethnic conflict, Religious conflict, Nested conflict
    JEL: D74 K42 O43 R3 L2
    Date: 2016–01
  14. By: Chatterjee, Tirtha
    Abstract: In this paper, we study the role of relative spatial location of states on agricultural growth in India. We use different definitions of neighbourhood and through a Spatial Durbin Model in a dynamic panel framework, we find that district based weighing scheme best explains the spatial dependence. The channels through which spatial spill-over occur are rural literacy, roads, irrigation and income of neighbouring states. The other factors driving agricultural income growth in India are inputs, infrastructural support and agricultural diversification. Identification of these channels of spatial interdependence will have implications for policies aimed at reducing spatial differences across Indian states.
    Keywords: Agriculture, spatial growth, spatial weight matrix, spatial dependence, spill over, Agricultural and Food Policy,
    Date: 2015
  15. By: Anna Orthofer
    Abstract: The point of departure of Thomas Piketty’s influential Capital in the Twenty-First Century was the dramatic growth of private wealth-income ratios in the advanced economies between 1970 and 2010. Using official balance sheet data for South Africa—the first country to publish such data in the developing world—, this paper examines to what extent this reemergence of private wealth was also experienced in the developing-country context. First, we find that the South African current wealth-income ratio is very close to its level in 1975 (255 and 240 percent), and thus much lower than those of Piketty’s sample of advanced economies (where they increased from 200-300 to 400-700 percent). Second, we show that the discrepancy is explained not only by South Africa’s relatively low savings rates, but also by the reduction of wealth before and during the transition to democracy in the 1990s. Since the late 1990s, however, private wealth recovered significantly, indicating that South Africa might resemble the advanced economies more closely in the future.
    Keywords: saving, Wealth
    JEL: E01 E10 E21
    Date: 2015
  16. By: Dominique Bianco (Université Nice Sophia Antipolis); Evens Salies (OFCE)
    Abstract: Few endogenous growth models have focused attention on the strong Porter hy-pothesis, that stricterenvironmental policies induce innovations, the benefits ofwhich exceed the costs. A key assumption in this hypothesis is that policy strict-ness pushes firms to overcome some obstacles to profit maximization. We model this hypothesis by incorporating pollution and taxation in the Aghion and Griffith (2005) analysis of growth with satisficing managers. Our theoretical results predictthe strong Porter hypothesis. Moreover, they suggest that the stringency of environmental policy should adjust to changes in the level of potential competition in the intermediate inputs sector.
    Keywords: Strong porter analysis; Environmental Policy; Endogenous growth
    JEL: D43 E3 O31 O41 O4
    Date: 2016–01

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