nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒03‒23
sixteen papers chosen by
Marc Klemp
Brown University

  1. "The Influence of Ancestral Lifeways on Individual Economic Outcomes in Sub-Saharan Africa" By Stelios Michalopoulos; Louis Putterman; David Weil
  2. The rich in historical perspective. Evidence for preindustrial Europe (ca. 1300-1800) By Guido Alfani
  3. The Global Diffusion of Ideas By Francisco J. Buera; Ezra Oberfield
  4. State Capacity and American Technology: Evidence from the 19th Century By Daron Acemoglu; Jacob Moscona; James A. Robinson
  5. Taxation, Corruption, and Growth By Philippe Aghion; Ufuk Akcigit; Julia Cagé; William R. Kerr
  6. Transition to clean technology By Acemoglu, Daron; Akcigit, Ufuk; Hanley, Douglas; Kerr, William R.
  7. The Impact of Race and Inequality on Human Capital Formation in Latin America During the Nineteenth and Twentieth Centuries By Enriqueta Camps; Stanley Engerman
  8. Education and Growth: Where All the Education Went By Theodore R. Breton; Andrew Siegel Breton
  9. Spanish Agriculture in the Little Divergence By Alvarez-Nogal, Carlos; Escosura, Leandro Prados de la; Santiago-Caballero, Carlos
  10. Institutional Governance, Education and Growth By Mohamed Jellal; Mohamed, Bouzahzah; Simplice Asongu
  11. Contractions in Chinese fertility and savings: long run domestic and global implications By Jane Golley; Rod Tyers; Yixiao Zhou
  12. Fertility, Retirement Age, and PAYG Pensions By Chen, Hung-Ju
  13. Economic growth and global particulate pollution concentrations By David I. Stern; Jeremy van Dijk
  14. On Indeterminacy and Growth under Progressive Taxation and Utility-Generating Government Spending By Jang-Ting Guo; Shu-Hua Chen
  15. What type of finance matters for growth? Bayesian model averaging evidence By Hasan, Iftekhar; Horvath, Roman; Mares, Jan
  16. How Does Inclusive Growth Boost Tax Revenue Mobilization? By Jean-Louis Combes; Rasmané Ouedraogo

  1. By: Stelios Michalopoulos; Louis Putterman; David Weil
    Abstract: We explore the role of an individual's historical lienage in determining economic status, holding constant his or her current location. This is complementary to the more common approachto studying how history shapes economic outcomes across locations. Motivated by a large literature in social sciences stressing the beneficial influence of agricultural transition on contemporary economic perfromance at the level of countries, we examine the relative status of descendants of agriculturalists vs. pastoralists. We match individual-level survey data with information on the historical lifeways of ancestors, focusing in Africa, where the transition away from such modes of production began only recently. Within enumeration areas and occupational groups, we find that individuals from ethnicities that derived a larger share of subsistence from agriculture in the pre-colonial era are today more educated and wealthy. A tentative exploration of channels suggests that differences in attitudes and beliefs as well as differential treatment by others, including less political power, may contribute to these divergent outcomes.
    Date: 2016
  2. By: Guido Alfani
    Abstract: This article provides an overview of long-term changes in the relative conditions of the rich in preindustrial Europe. It covers four pre-unification Italian states (Sabaudian State, Florentine State, Kingdom of Naples and Republic of Venice) as well as other areas of Europe (Low Countries, Catalonia) during the period 1300-1800. Three different kinds of indicators are measured systematically and combined in the analysis: headcount indexes, the share of the top rich, and richness indexes. Taken together, they suggest that overall, during the entirety of the early modern period the rich tended to become both more prevalent and more distanced from the other strata of society. The only period during which the opposite process took place was the late Middle Ages, following the Black Death epidemic of the mid-fourteenth century. In the period from ca. 1300 to 1800, the prevalence of the rich doubled. In the Sabaudian State, the Florentine State and the Kingdom of Naples, for which reconstructions of regional wealth distributions exist, in about the same period the share of the top 10% grew from 45-55% to 70-80% - reaching almost exactly the same level which has recently been suggested as the European average at 1810. Consequently, the time series presented here might be used to add about five centuries of wealth inequality trends to current debates on very long-term changes in the relative position of the rich. Keywords Economic inequality; wealth concentration; richness; top wealthy; middle ages; early modern period; Italy; Low Countries; Catalonia; Black Death; property structures JEL codes N300, N330, N930, D310
    Date: 2016
  3. By: Francisco J. Buera; Ezra Oberfield
    Abstract: We provide a tractable theory of innovation and technology diffusion to explore the role of international trade in the process of development. We model innovation and diffusion as a process involving the combination of new ideas with insights from other industries or countries. We provide conditions under which each country's equilibrium frontier of knowledge converges to a Frechet distribution, and derive a system of differential equations describing the evolution of the scale parameters of these distributions, i.e., countries' stocks of knowledge. In particular, the growth of a country's stock of knowledge depends only on its trade shares and the stocks of knowledge of its trading partners. We use the framework to quantify the contribution of bilateral trade costs to cross-sectional TFP differences, long-run changes in TFP, and individual post-war growth miracles.
    JEL: F1 F43 O33 O47
    Date: 2016–01
  4. By: Daron Acemoglu; Jacob Moscona; James A. Robinson
    Abstract: Robert Gordon's The Rise and Fall of American Economic Growth provides a compelling interpretation of how technical change and innovation has radically changed the living standards of the citizens of the US in the past 150 years. Lying behind these changes are the institutions which have allowed the country to harness its human potential. In this paper we conduct an empirical investigation of the impact of one key set of institutions, the capacity of the US state as proxied by the presence of post offices in a county, on innovation. We show that between 1804 and 1899, the time when the US became the world technological leader, there is a strong association between the presence and number of post offices in a county and patenting activity, and it appears that it is the opening of postal offices that leads to surges in patenting activity, not the other way around. Our evidence suggests that part of the yet untold story of US technological exceptionalism is the way in which the US created an immensely capable and effective state.
    JEL: D70 N11 N41 O3
    Date: 2016–01
  5. By: Philippe Aghion; Ufuk Akcigit; Julia Cagé; William R. Kerr
    Abstract: We build an endogenous growth model to analyze the relationships between taxation, corruption, and economic growth. Entrepreneurs lie at the center of the model and face disincentive effects from taxation but acquire positive benefits from public infrastructure. Political corruption governs the efficiency with which tax revenues are translated into infrastructure. The model predicts an inverted-U relationship between taxation and growth, with corruption reducing the optimal taxation level. We find evidence consistent with these predictions and the entrepreneurial channel using data from the Longitudinal Business Database of the US Census Bureau. The marginal effect of taxation for growth for a state at the 10th or 25th percentile of corruption is significantly positive; on the other hand, the marginal effects of taxation for growth for a state at the 90th percentile of corruption are much lower across the board. We make progress towards causality through Granger-style tests and by considering periphery counties where effective tax policy is largely driven by bordering states. Finally, we calibrate our model and find that the calibrated taxation rate of 37% is fairly close to the model's estimated welfare maximizing taxation rate of 42%. Reducing corruption provides the largest potential impact for welfare gain through its impact on the uses of tax revenues.
    JEL: H11 H21 H25 H41 H71 H72 M13 O11 O12 O40 R11 R12
    Date: 2016–01
  6. By: Acemoglu, Daron; Akcigit, Ufuk; Hanley, Douglas; Kerr, William R.
    Abstract: We develop a microeconomic model of endogenous growth where clean and dirty technologies compete in production and innovation–in the sense that research can be directed to either clean or dirty technologies. If dirty technologies are more advanced to start with, the potential transition to clean technology can be difficult both because clean research must climb several rungs to catch up with dirty technology and because this gap discourages research effort directed towards clean technologies. Carbon taxes and research subsidies may nonetheless encourage production and innovation in clean technologies, though the transition will typically be slow. We characterize certain general properties of the transition path from dirty to clean technology. We then estimate the model using a combination of regression analysis on the relationship between R&D and patents, and simulated method of moments using microdata on employment, production, R&D, firm growth, entry and exit from the US energy sector. The model’s quantitative implications match a range of moments not targeted in the estimation quite well. We then characterize the optimal policy path implied by the model and our estimates. Optimal policy makes heavy use of research subsidies as well as carbon taxes. We use the model to evaluate the welfare consequences of a range of alternative policies.
    Keywords: carbon cycle, directed technological change, environment, innovation, optimal policy
    JEL: O30 O31 O33 C65
    Date: 2015–12–10
  7. By: Enriqueta Camps; Stanley Engerman
    Abstract: In this paper we analyze the reasons behind the delay of the spread of education in Latin America and its relationship with income inequality and race. While the racial composition of the population was behind the low literacy levels obtained during the 19th and first part of the 20th centuries, racial inequality and its impact on education and educational inequality decreased during the last decades of the 20th century. Nonetheless educational levels lagged behind those of the OECD countries even during the late 20th century. We also find that the spread of primary and to a lesser extent secondary school during the 20th century can explain the sharp decrease of educational inequality during the same time period. Nonetheless this diminution of educational inequality did not have any impact on the diminution of income inequality at least during the 20th century. While this paper gives consistent results on race and inequality on human capital formation, the trends and causes of the long run evolution of income inequality till the beginnings of the 21st century are still a controversial research topic that we want to further discuss in other forthcoming contributions.
    Date: 2016–03
  8. By: Theodore R. Breton; Andrew Siegel Breton
    Abstract: Abstract: We investigate why the economics literature often finds a negative relationship between increased schooling and GDP growth over short periods. We show that increases in GDP in 98 countries during five-year intervals are correlated with the increases in adults´ average schooling during the prior 40 years. We find that an additional year of schooling of the work force raised GDP by 7% on average during 1980-2005, but its initial effect on GDP was much smaller. The delayed effect of increased schooling on national productivity explains why recent increases in schooling cannot explain near-term increases in GDP.
    Keywords: Education; Economic Growth; Multi-country; Human Capital; Production Function
    JEL: O47 I25
    Date: 2016–02–01
  9. By: Alvarez-Nogal, Carlos (Universidad Carlos III); Escosura, Leandro Prados de la (Universidad Carlos III, CEPR, and CAGE); Santiago-Caballero, Carlos (Universidad Carlos III)
    Abstract: This paper explores the role of agriculture in Spain’s contribution to the little divergence in Europe. On the basis of tithes, long-run trends in agricultural output are drawn. After a long period of relative stability, output suffered a severe contraction during 1570-1620, followed by stagnation to 1650, and steady expansion thereafter. Output per head shifted from a relatively high to a low path that persisted until the nineteenth century. The decline in agricultural output per head and per worker from a relatively high level contributed to Spain falling behind and, hence, to the Little Divergence in Europe. Output per worker moved along labour force in agriculture over the long run, supporting the depiction of Spain as a frontier economy. Institutional factors, in a context of financial and monetary instability and war, along climatic anomalies, provide explanatory hypotheses that deserve further research.
    Keywords: agriculture, tithes, early modern Spain, labour productivity, little divergence JEL Classification: N53, O13, Q10
    Date: 2016
  10. By: Mohamed Jellal (Rabat, Morocco); Mohamed, Bouzahzah (Rabat, Morocco); Simplice Asongu (Yaoundé/Cameroon)
    Abstract: This study articulates the interaction between institutional governance, education and economic growth. Given the current pursuit of education policy reforms and knowledge economy around the world, it is of policy relevance to theoretically analyze the main mechanisms by which the macroeconomic impact of education on growth (and economic development) occurs. Our theoretical model demonstrates how incentives offered by the government affect human capital accumulation which ultimately engenders positive economic development externalities. We articulate two main channels through which education affects economic growth. The first channel highlights direct positive effect of educational quality on the incentive to accumulate human capital by individuals, which makes them more productive. The second channel appears in the explicit function of the economic growth rate. As a policy implication, we have shown that the growth rate depends on the rate of return on human capital or that this rate of return itself depends on the quality of governance, which further increases growth. As a result, institutional quality has a double dividend, which suggests considerable benefits to educational reforms.
    Keywords: Institutions, Human capital, Education, Growth
    JEL: H11 O15 O43
    Date: 2015–12
  11. By: Jane Golley; Rod Tyers; Yixiao Zhou
    Abstract: Following three decades of rapid but unbalanced economic growth, China's reform and policy agenda are set to rebalance the economy toward consumption while maintaining a rate of GDP growth near seven per cent. Among the headwinds it faces is a demographic contraction that brings slower, and possibly negative, labour force growth and relatively rapid ageing. While the lower saving rates that result from consumption-oriented policies and rising aged dependency may contribute to a rebalancing of the economy, in the long run they will reduce both GDP growth and per capita income. Moreover, while an effective transition from the one-child policy to a two-child policy would help sustain growth and eventually mitigate the aged dependency problem, it would set real per capita income on a still lower path. These conundrums are examined using a global economic and demographic model, which embodies the main channels through which fertility and saving rates impact on economic performance. The results quantify the associated trade-offs and show that continuing demographic and saving contractions in China would alter the trajectory of the global economy as well.
    Keywords: China, demography, imbalances, spill-overs, global effects
    JEL: F42 F43 F47
    Date: 2016–03
  12. By: Chen, Hung-Ju
    Abstract: This paper develops an overlapping generations (OLG) model with exogenous and endogenous retirement age to examine the effects of fertility on long-run pay-as-you-go (PAYG) pensions. We find that in both cases, pensions may not necessarily increase with the fertility rate. In the case with exogenous retirement age, an increase in the fertility rate (retirement age) may raise pensions when the output elasticity of capital is low. When the output elasticity of capital is high, an increase in the fertility rate (retirement age) will reduce (raise) pensions if the tax rate is sufficiently high. In the case with endogenous retirement age, a higher fertility rate will reduce pensions if the fertility rate is sufficiently high, but such a change will raise pensions if the output elasticity of capital and the tax rate are sufficiently low. Our results indicate that raising the fertility rate is more likely to reduce pensions in developing countries than in developed countries, while such a change tends to raise pensions for countries with sufficiently low output elasticity of capital and tax rate.
    Keywords: Fertility; Retirement; OLG, PAYG pensions.
    JEL: H55 J13 J26
    Date: 2016–03–02
  13. By: David I. Stern (Crawford School of Public Policy, The Australian National University); Jeremy van Dijk (Australian Bureau of Agricultural and Resource Economics and Sciences, Australia)
    Abstract: Though the environmental Kuznets curve (EKC) was originally developed to model the ambient concentrations of pollutants, most subsequent applications focused on pollution emissions. Yet, previous research suggests that it is more likely that economic growth could eventually reduce the concentrations of local pollutants than emissions. We examine the role of income, convergence, and time related factors in explaining changes in PM2.5 pollution in a global panel of 158 countries between 1990 and 2010. We find that economic growth has positive but relatively small effects, time effects are also small but larger in wealthier and formerly centrally planned economies, and, for our main dataset, convergence effects are small and not statistically significant. There is no in-sample income turning point for regressions that include both the convergence variables and a set of control variables.
    Keywords: air pollution; economic growth; environmental Kuznets curve
    JEL: O44 Q53 Q56
    Date: 2016–02
  14. By: Jang-Ting Guo (Department of Economics, University of California Riverside); Shu-Hua Chen (National Taipei University)
    Abstract: We examine the theoretical interrelations between progressive income taxation and macroeconomic (in)stability in an otherwise standard one-sector AK model of endogenous growth with utility-generating government purchases of goods and services. In sharp contrast to traditional Keynesian-type stabilization policies, progressive taxation operates like an automatic destabilizer that generates equilibrium indeterminacy and belief-driven fluctuations in our endogenously growing macroeconomy. This instability result is obtained regardless of (i) the degree of the public-spending preference externality, and (ii) whether private and public consumption expenditures are substitutes, complements, or additively separable in the household's utility function.
    Keywords: Progressive Income Taxation, Equilibrium (In)determinacy, Utility-Generating Government Spending, Endogenous Growth.
    JEL: E32 E62
    Date: 2016–03
  15. By: Hasan, Iftekhar; Horvath, Roman; Mares, Jan
    Abstract: We examine the effect of finance on long-term economic growth using Bayesian model averaging to address model uncertainty in cross-country growth regressions. The literature largely focuses on financial indicators that assess the financial depth of banks and stock markets. We examine these indicators jointly with newly developed indicators that assess the stability and efficiency of financial markets. Once we subject the finance-growth regressions to model uncertainty, our results suggest that commonly used indicators of financial development are not robustly related to long-term growth. However, the findings from our global sample indicate that one newly developed indicator – the efficiency of financial intermediaries – is robustly related to long-term growth.
    Keywords: finance, growth, Bayesian model averaging
    JEL: C11 G10 O40
    Date: 2015–08–20
  16. By: Jean-Louis Combes (CERDI - Centre d'études et de recherches sur le developpement international - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique); Rasmané Ouedraogo (CERDI - Centre d'études et de recherches sur le developpement international - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Despite high economic growth in the last decades, many developing countries remain into poverty, income inequality and unemployment of young people, which have led some countries to adopt inclusive growth strategies. In this paper, we show how inclusive growth can boost tax revenue mobilization in developing countries. Effective public policies, improving social cohesion are fundamental to meet citizens’ aspirations and therefore incite them to comply with taxes. To this end, this study uses GMM techniques to deal with endogeneity issue and spans 55 developing countries over the period of 1995-2010. We find that inclusive growth has positive effect on tax revenue mobilization. This finding is robust to various aspects of inclusive growth measurements and additional controls.
    Keywords: Inclusive growth, Taxes revenue, Inequality, Employment
    Date: 2016–03–03

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