nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒02‒12
sixteen papers chosen by
Marc Klemp
Brown University

  1. Growth or stagnation in pre-industrial Britain? A revealed income growth approach By Groth, Christian; Persson, Karl Gunnar
  2. The Engine and the Reaper: Industrialization and Mortality in Early Modern Japan By John Tang
  3. Historical Education Levels and Present-Day Non-Cognitive Skills By Eiji Yamamura
  4. Migrants, Ancestors, and Investments By Burchardi, Konrad B.; Chaney, Thomas; Hassan, Tarek
  5. Democracy and growth in pre-industrial countries By BRESSER-PEREIRA, Luiz Carlos
  6. There is poverty convergence By Jesus Crespo Cuaresma; Stephan Klasen; Konstantin M. Wacker
  7. The evolution of the gender gap in industrialized countries. By Olivetti, Claudia; Petrongolo, Barbara
  8. Poverty traps: the neglected role of vitality By Meysonnat, Aline; Muysken, Joan; Zon, Adriaan van
  9. Protectionism and the Education-Fertility Trade-off in Late 19th Century France By Vincent Bignon; Cecilia García-Peñalosa
  10. The Dynamics of Inequality By Gabaix, Xavier; Lasry, Jean-Michel; Lions, Pierre-Louis; Moll, Benjamin
  11. Balanced Growth Despite Uzawa By Grossman, Gene; Helpman, Elhanan; Oberfield, Ezra; Sampson, Thomas
  12. The Political Economy of Inclusive Rural Growth By Carter, Michael; Morrow, John
  13. Does technological change drive inclusive industrialization? : A review of major concepts and findings By Gries, T.; Grundmann, R.; Palnau, I.; Redlin, M.
  14. The innovation-trade nexus: Italy in historical perspective (1861-1939) By Domini, Giacomo
  15. Structural change and the ability to sustain growth By Foster-McGregor, Neil; Kaba, Ibrahima; Szirmai, Adam
  16. Growth and innovation in the presence of knowledge and R&D accumulation dynamics By Verba, M.

  1. By: Groth, Christian (Department of Economics, University of Copenhagen); Persson, Karl Gunnar (Department of Economics, University of Copenhagen)
    Abstract: The extent of growth in pre-industrial Europe in general and in Britain in particular has attracted intense scholarly focus. Growth or Malthusian stagnation? No consensus has evolved. Reconstructions of national income from 1300 and up to the Industrial Revolution come to opposing conclusions and so do econometric studies. Applying Engels’ law, we suggest a new approach in which income growth is revealed by changes in occupational structure. Data needed for this approach are less contested than the wage and output series used in the existing literature. We find that pre-industrial Britain exhibited secular rise in the standard of living.
    Keywords: Malthusian stagnation; Engel’s law; Revealed income growth; Pre-industrial productivity growth; Structural change. JEL Classification: E24, N13, O11, O41, O47
    Date: 2016
  2. By: John Tang
    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 Meiji Japan, I find mortality rates increased during the country's early industrialization, with railroad access accounting for over five percent of average mortality between 1886 and 1893. 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: contagion, market integration, mortality Kuznets curve, public health, railroad transport
    JEL: J11 N75 O14
    Date: 2016–01
  3. By: Eiji Yamamura
    Abstract: This study examined the extent to which education levels in the 19th century have shaped current norms, which influence individuals' present-day non-cognitive skills and perceptions of life. Cross-country, individual-level data were compared with each country's average years of schooling in 1870. After controlling for various country-level and individual characteristics, the key findings were as follows: (1) people in countries with high historical education levels place importance on hard work, ambition, and education; (2) people in countries with high historical education levels tend to show perseverance and have a sense of responsibility.
    Date: 2015–12
  4. By: Burchardi, Konrad B.; Chaney, Thomas; Hassan, Tarek
    Abstract: We use 130 years of data on historical migrations to the United States to show a causal effect of the ancestry composition of US counties on foreign direct investment (FDI) sent and received by local firms. To isolate the causal effect of ancestry on FDI, we build a simple reduced-form model of migrations: migrations from a foreign country to a US county at a given time depend on (i) a push factor, causing emigration from that foreign country to the entire United States, and (ii) a pull factor, causing immigration from all origins into that US county. The interaction between time-series variation in country-specific push factors and county-specific pull factors generates quasi-random variation in the allocation of migrants across US counties. We find that a doubling of the number of residents with ancestry from a given foreign country relative to the mean increases by 4.2 percentage points the probability that at least one local firm invests in that country, and increases by 31% the number of employees at domestic recipients of FDI from that country. The size of these effects increases with the ethnic diversity of the local population, the geographic distance to the origin country, and the ethno-linguistic fractionalization of the origin country.
    Keywords: foreign direct investment; international trade; migrations; networks; social ties
    JEL: J61 L14 O11
    Date: 2015–12
  5. By: BRESSER-PEREIRA, Luiz Carlos
    Abstract: This paper distinguishes three types of countries (rich, middle-income, and pre-industrial) and focus on the latter, which, in contrast to the other two, didn’t complete their industrial and capitalist revolutions. Can pre-industrial countries be governed well and embody the principles of consolidated democracies? Today these countries are under pressure from the imperial West to eschew institutions and developmental strategies that, in the past, allowed rich and middle-income countries to industrialize. At the same time, they are pressured by these same Western parties (and by its own people) to be democratic, even though their societies are not mature enough to fulfill that. In fact, no country completed its industrial and capitalist revolution within the framework of even a minimal democracy, suggesting that such demands are unfair. Added to this, pre-industrial countries are extremely difficult to govern because they usually don’t have a strong nation and capable states. This double pressure to renounce development strategies that have worked for the West while being required to become a democracy represents a major obstacle to their development.
    Date: 2015–01–28
  6. By: Jesus Crespo Cuaresma (Department of Economics, Vienna University of Economics and Business); Stephan Klasen (University of Göttingen); Konstantin M. Wacker (University of Mainz)
    Abstract: Martin Ravallion ("Why Don't We See Poverty Convergence?" American Economic Review, 102(1): 504-23; 2012) presents evidence against the existence of convergence in global poverty rates despite convergence in household mean income levels and the close linkage between income growth and poverty reduction. We show that this finding is driven by a specification that demands more than simple convergence in poverty headcount rates and assumes a growth elasticity of poverty reduction, which is well-known to accelerate with low initial poverty levels. If we motivate the poverty convergence equation using an arguably superior growth semi-elasticity of poverty reduction, we find highly significant and robust evidence of convergence in absolute poverty headcount ratios and poverty gaps. Relatedly, we show that the results in Ravallion (2012) are driven by the special income growth and poverty dynamics in Central and Eastern European transition economies that started with low initial poverty rates and thus observed a high elasticity of poverty reduction. Once we control for their abnormal poverty dynamics, we again find robust evidence of global convergence in poverty, even in the original specification by Ravallion (2012).
    Keywords: poverty convergence, economic growth, poverty trap, transition economies
    JEL: I32 D31 P36
    Date: 2016–01
  7. By: Olivetti, Claudia; Petrongolo, Barbara
    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: female employment; gender gaps; industry structure
    JEL: E24 J16 J31
    Date: 2016–01
  8. By: Meysonnat, Aline (SBE, Maastricht University); Muysken, Joan (UNU-MERIT, and SBE, Maastricht University); Zon, Adriaan van (UNU-MERIT, and SBE, Maastricht University)
    Abstract: This paper proposes an integrated framework that incorporates both the "physical" and the "behavioural" dimensions of poverty in developing countries and their consequences for aggregate savings behaviour. To this end a concept is introduced, labelled "vitality", which captures the idea that being near subsistence consumption levels not only has an impact on the ability to save, but also on the willingness to save. We introduce the notion of a "vitality threshold" which marks a situation where the willingness to invest into the future changes - this is represented by a change in the discount rates. The recognition of transition paths from a "pessimistic", low-savings regime with high discount rates to an "optimistic" regime with relatively high savings enables us to analyse the transition of countries through various stages of development. In addition to this, we can shed new light on poverty traps by looking at below subsistence consumption scenarios. Finally we can infer specific policy implications concerning development aid. For instance, if a country is in a pessimistic, low-savings regime, we argue that a transfer should be high enough to push a country above the subsistence-level consumption threshold by far enough to enable it to reach the optimistic, high savings regime and consequently grow out of poverty. The existence of vitality thresholds implies that marginal changes in development assistance may have non-marginal long-term effects
    Keywords: poverty trap, subsistence consumption, vitality, foreign aid
    JEL: O10 O20 I12 I13 I15 I31 I32 F35 E21
    Date: 2015–12–01
  9. By: Vincent Bignon (DGEI-DEMFI-POMONE – Banque de France); Cecilia García-Peñalosa (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université)
    Abstract: The assumption that education and fertility are endogenous decisions that react to economic circumstances is a cornerstone of the unified growth theory that explains the transition to modern economic growth, yet evidence that such a mechanism was in operation before the 20th century is limited. This paper provides evidence of how protectionism reversed the education and fertility trends that were well under way in late 19th-century France. The Méline tariff, a tariff on cereals introduced in 1892, led to a substantial increase in agricultural wages, thus reducing the relative return to education. Since the importance of cereal production varied across regions, we use these differences to estimate the impact of the tariff. Our findings indicate that the tariff reduced education and increased fertility. The magnitude of these effects was substantial, and in regions with large shares of employment in cereal production the tariff offset the time trend in education for up to 15 years. Our results thus indicate that even in the 19th century, policies that changed the economic prospects of their offspring affected parents’ decisions about the quantity and quality of children.
    Keywords: education,fertility,unified growth theory,protectionism,France
    Date: 2016–01
  10. By: Gabaix, Xavier; Lasry, Jean-Michel; Lions, Pierre-Louis; Moll, Benjamin
    Abstract: The past forty years have seen a rapid rise in top income inequality in the United States. While there is a large number of existing theories of the Pareto tail of the long-run income distributions, almost none of these address the fast rise in top inequality observed in the data. We show that standard theories, which build on a random growth mechanism, generate transition dynamics that are an order of magnitude too slow relative to those observed in the data. We then suggest two parsimonious deviations from the canonical model that can explain such changes: "scale dependence" that may arise from changes in skill prices, and "type dependence," i.e. the presence of some "high-growth types." These deviations are consistent with theories in which the increase in top income inequality is driven by the rise of "superstar" entrepreneurs or managers.
    Keywords: inequality; operator methods; Pareto distribution; speed of transition; superstars
    JEL: D31 E24
    Date: 2015–12
  11. By: Grossman, Gene; Helpman, Elhanan; Oberfield, Ezra; Sampson, Thomas
    Abstract: Evidence for the United States suggests balanced growth despite falling investment-good prices and less than unitary elasticity of substitution between capital and labor. This is inconsistent with the Uzawa Growth Theorem. We extend Uzawa's theorem to show that introducing human capital accumulation in the standard way does not resolve the puzzle. However, balanced growth is possible if education is endogenous and capital is more complementary with schooling than with raw labor. We describe balanced growth paths for several neoclassical growth models with capital-augmenting technological progress and endogenous schooling. The balanced growth path in an overlapping-generations model in which individuals choose their time in school matches key features of the U.S. record.
    Keywords: balanced growth; capital-skill complementarity; neoclassical growth; technological progress
    JEL: E1 J2 O1 O4
    Date: 2016–01
  12. By: Carter, Michael; Morrow, John
    Abstract: Commentators on the ‘East Asian Miracle’ of inclusive rural growth have often pointed toward shared growth policies. But why were these policies not chosen elsewhere? This paper shows that economies with a stronger middle class may sustain higher productivity through public good provision. We model voters who invest in either subsistence or technologies in which public goods complement private capital. Investment and technology choices vary with wealth and the level of public goods enforced by political lobbies. We show that increased productive possibilities, such as those of an emerging middle class, can further power reforms when money matters in politics.
    Date: 2015
  13. By: Gries, T. (University of Paderborn); Grundmann, R. (University of Paderborn); Palnau, I. (University of Paderborn); Redlin, M. (University of Paderborn)
    Abstract: Technical change is a major driving force for economic growth and development, thus, technological change and innovations could be a powerful process that opens-up opportunities to increase social welfare and social benefits for societies. Whether in reality opportunities from the process of technical change turn into real and inclusive benefits for a society depends on a number of facts. Hence, in this contribution we focus on the question of inclusiveness for the global process of innovation and technical change. We discuss a number of questions such as: Does technical change in DCs show specific characteristics that affect different groups of labour asymmetrically? Further, for the transfer of technologies to LDCs we ask: What are the channels of technological transfer from DCs to LDCs that allow developing economies to participate in benefits of technical change? How can a transfer of technologies affect economic and social development? After identifying such elements that link technical change to the question of inclusiveness we describe the effects of technical change on inclusiveness in DCs and LDCs. We try to answer questions like: Which groups benefit more or less from gains of technical change? Were benefits inclusive for a major share of the population or could basically small groups take advantage? Which are the reasons that led to non-inclusive growth for a larger share of the population.
    Keywords: innovation, technological change, global technological transfer, structural transformation, industrial development, development, inclusiveness
    JEL: F15 F16 I24 J31 O14 O15 O33
    Date: 2015–11–18
  14. By: Domini, Giacomo (UNU-MERIT, and Department of Economics and Statistics, University of Siena)
    Abstract: This work investigates the relationship between trade and technological specialisation in Italy, during the long time span ranging from Unification to the eve of the Second World War. To do this, new series of Italy's indices of specialisation in trade and technology are calculated on the base of offcial data. Empirical analysis, based on Spearman rank correlation coefficients and fixed-effects regression, shows the emergence of a positive relationship between specialisation in technology and specialisation in trade after the start of the country's modern economic growth, around the turn of the twentieth century. This, however, was uniquely driven by a negative relationship between technological specialisation and import shares, while no significant relationship between the former and export shares emerges. Furthermore, this finding excludes the most important sector, leading Italian industrialisation, i.e. textiles, the outstanding performance of which can be seen as largely determined by its being particularly suited to the country's factor endowment.
    Keywords: innovation, industrial specialization, trade, import-export, economic history, Italy, specialisation, comparative advantage
    JEL: N73 N74 O14 O33
    Date: 2015–12–10
  15. By: Foster-McGregor, Neil (UNU-MERIT); Kaba, Ibrahima (UNU-MERIT); Szirmai, Adam (UNU-MERIT)
    Abstract: This paper examines the relationships between structural characteristics and the ability to sustain growth. The analysis is based on a novel dataset of sectoral shares in GDP and growth rates for 108 countries from 1960 to 2010. Rather than focusing exclusively on average growth rates, the paper examines the characteristics of positive growth episodes. Dependent variables include the duration of positive growth episodes and the risk that such growth episodes come to an end. Structural characteristics include the degree of sectoral specialisation, the share of manufacturing and the share of the modern sector in GDP. We find that higher shares of manufacturing, high and increasing shares of the modern sector and a more diversified structure of production contribute to longer duration of growth episodes and reduced volatility of growth patterns. The effects of these same variables on average growth rates are much more ambiguous.
    Keywords: economic growth, sustainable growth, growth rate, duration of growth, duration, volatility, specialisation, diversification, structure, structural change, structural transformation
    JEL: O40 O14 L16
    Date: 2015–12–01
  16. By: Verba, M. (UNU-MERIT)
    Abstract: This article develops a model of growth and innovation in which accumulation dynamics of knowledge and R&D are explicitly considered. The model is based on a more general knowledge production process than commonly used in Endogenous Growth Theory and R&D productivity literatures, reconciling as special cases of a broader framework disparate analytical approaches. The model of knowledge dynamics highlights the role of human capital, physical capital, and accumulation in the creation of innovations and establishes the theoretical possibility of long-run idea-driven growth without the razor-edge assumption of Romer (1990) and in the absence of growth in R&D employment stipulated by Jones (1995). This analysis also predicts the structure of estimation biases that can result from omission of relevant factors and failure to take into account the accumulation dynamics of knowledge and R&D. Empirical estimation supports these predictions. Findings provide recommendations for future empirical studies aiming to explain innovation.
    Keywords: Growth theory, innovation, R&D, productivity, knowledge, production function, accumulation
    JEL: O30 O31 O32 O40
    Date: 2015–12–04

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