nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒04‒04
fifteen papers chosen by
Marc Klemp
Brown University

  1. French Fertility and Education Transition: Rational Choice vs. Cultural Diffusion By David de la Croix; Faustine Perrin
  2. Religious Differences and Civil War By Metin M. Cosgel; Thomas J. Miceli; Sadullah Yıldırım
  3. State Capacity and Public Goods: Institutional change, Human Capital and Growth in Early Modern Germany By Jeremiah Dittmar; Ralph R. Meisenzahl
  4. BMI Growth Rates and the Nutrition Transition: The Role of Income, Inequality and Income Growth in Russia By Butzlaff, Iris
  5. Three-generation Mobility in the United States, 1850-1940: The Role of Maternal and Paternal Grandparents By Claudia Olivetti; M. Daniele Paserman; Laura Salisbury
  6. Intergenerational mobility and the rise and fall of inequality: Lessons from Latin America By Neidhöfer, Guido
  7. The Stages of Economic Growth Revisited: Part 1: A General Framework and Taking Off into Growth By Kehoe, Timothy J.; Costa, Daniela; Raveendranathan, Gajen
  8. From Physical to Human Capital Accumulation with Pollution By Takumi Motoyama
  9. Ethnic Inequality: Theory and Evidence from Formal Education in Nigeria By Pritha Dev; Blessing U. Mberu; Roland Pongou
  10. Economic Growth, the High-Tech Sector, and the High Skilled: Theory and Quantitative Implications By Pedro Mazeda Gil; Oscar Afonso; Paulo Brito
  11. Capital, growth and inequality in Piketty's approach. Is it able to explain level and changes of inequality in the personal income distribution? By Renata Targetti Lenti
  12. Productivity Gaps and Tax Policies Under Asymmetric Trade By Lucas Bretschger; Simone Valente
  13. Sectoral FDI and Economic Growth — Evidence from Egyptian Governorates By Shima'a Hanafy
  14. On the Empirics of Institutions and Quality of Growth: Evidence for Developing Countries By Asongu, Simplice A.; Kodila-Tedika, Oasis
  15. Business Dynamism and Economic Growth: U.S. Regional Evidence By Miguel Casares; Hashmat U. Khan

  1. By: David de la Croix (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Center for Operations Research and Econometrics (CORE)); Faustine Perrin (Department of Economic History, Lund University)
    Abstract: We analyze how much a rational-choice model can explain the temporal and spatial variation in fertility and school enrollment in France during the 19th century. The originality of our approach is in our reliance on a structural estimation technique that exploits the restrictions implied by the first-order conditions to identify the deep parameters. Another new dimension is our use of gendered education data, allowing us to have a richer theory that includes mothers, fathers, boys and girls. Results indicate that the rational-choice model explains 38 percent of the variation of fertility over time and across counties, as well as 71 percent and 83 percent of school enrollment of boys and girls, respectively. The analysis of the residuals (unexplained by the economic model) indicates that additional insights might be gained by considering cross-county differences in family structure and cultural barriers.
    Keywords: Quality-quantity tradeoff, Education, Gender Gap, Demographic transition, France
    JEL: J13 N33 O11
    Date: 2016–03–03
  2. By: Metin M. Cosgel (University of Connecticut); Thomas J. Miceli (University of Connecticut); Sadullah Yıldırım (University of Connecticut)
    Abstract: Civil wars of today have deep roots in political and religious history. We examine how a society’s geographic distance to religious centers and the consequent historical differences between political rulers and religious segments of the population contributed to current levels of civil war. The theory is based on a political economy model that is centered on legitimizing function that religion plays for rulers vis-à-vis citizens. We test the resulting hypotheses using a new dataset that includes annual information on the religious and political histories of today’s nations since the year 1000. The results show that civil wars in the post-1960 period have been more likely in societies that experienced higher incidents of historical differences between rulers and a significant religious group before 1960. The results hold when we control for the geographic, historical, and institutional characteristics of countries. We address endogeneity concerns between religious differences and civil wars by exploiting variation across countries in their geographic distance to religious “capitals” of the world. Instrumental variable analysis indicates that the presence of historical religious differences that could be exploited by rulers accounts for a substantial portion of civil wars between 1960 and 2014. The results reflect the deep root effects of religious differences on current conflict.
    Keywords: Civil war, conflict, religion, historical roots, political economy, grievance, geographic distance, religious difference
    JEL: D63 D74 J15 N30 O50 Z12
    Date: 2016–03
  3. By: Jeremiah Dittmar; Ralph R. Meisenzahl
    Abstract: What are the origins and consequences of the state as a provider of public goods? We study legal reforms that established mass public education and increased state capacity in German cities during the 1500s. These fundamental changes in public goods provision occurred where ideological competition during the Protestant Reformation interacted with popular politics at the local level. We document that cities that formalized public goods provision in the 1500s began differentially producing and attracting upper tail human capital and grew to be significantly larger in the long-run. We study plague outbreaks in a narrow time period as exogenous shocks to local politics and find support for a causal interpretation of the relationship between public goods institutions, human capital, and growth. More broadly, we provide evidence on the origins of state capacity directly targeting welfare improvement.
    Keywords: State Capacity, Institutions, Growth, Education, Human Capital, Persistence
    JEL: I25 N13 O11 O43
    Date: 2016–03
  4. By: Butzlaff, Iris
    Abstract: This study analyzes the extent to which nutritional status in terms of weight change has been affected by the income distribution as the economy has grown. Is BMI growth different at different tails of the income distribution? Health and nutritional outcomes are not normally expected to be uniform across the income distribution and over time. Using recent individual level data from the Russia Longitudinal Monitoring Survey (RLMS) from 1994 to 2012, we scrutinize the influence of transitional processes, particularly economic transitions on nutritional and health outcomes. We test the hypothesis that the income gradient of individual body weight growth (i.e. the relationship between income and BMI growth) follows an inverted U-shape and thus changes its sign from positive to negative in the process of economic development. For the case of Russia, we could not find clear evidence that the income-BMI-growth gradient has already shifted. Turning points have not yet been reached. Expenditure increases have significant positive effects on BMI levels and on BMI growth rates. Better educated women have lower BMI levels than women with less than secondary education whereas men who completed tertiary education have higher BMI levels than men with less than secondary education.
    Keywords: Overweight, obesity, health, transition economy, Russia, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, H51, I15, O15, P36,
    Date: 2016–03
  5. By: Claudia Olivetti; M. Daniele Paserman; Laura Salisbury
    Abstract: This paper estimates intergenerational elasticities across three generations in the United States in the late 19th and early 20th centuries. We extend the methodology in Olivetti and Paserman (2015) to explore the role of maternal and paternal grandfathers for the transmission of economic status to grandsons and granddaughters. We document three main findings. First, grandfathers matter for income transmission, above and beyond their effect on fathers' income. Second, the socio-economic status of grandsons is influenced more strongly by paternal grandfathers than by maternal grandfathers. Third, maternal grandfathers are more important for granddaughters than for grandsons, while the opposite is true for paternal grandfathers. We present a model of multi-trait matching and inheritance that can rationalize these findings.
    JEL: J12 J62 N31 N32
    Date: 2016–03
  6. By: Neidhöfer, Guido
    Abstract: Countries with high income inequality also show a strong association between parents´ and children´s economic well-being; i.e. low intergenerational mobility. This study is the first to test this relationship in a between and within country setup, using harmonized micro data from 18 Latin American countries spanning multiple cohorts. It is shown that experiencing higher inequality in childhood has a negative effect on intergenerational mobility as adults. Furthermore, the influence of economic growth and public education is evaluated: both have a positive, significant, and substantial effect on intergenerational mobility.
    Keywords: inequality,intergenerational mobility,equality of opportunity,human capital,growth,development,public education,Great Gatsby Curve,Latin America
    JEL: D63 I24 J62 O15
    Date: 2016
  7. By: Kehoe, Timothy J. (Federal Reserve Bank of Minneapolis); Costa, Daniela (Federal Reserve Bank of Minneapolis); Raveendranathan, Gajen (Federal Reserve Bank of Minneapolis)
    Abstract: We propose a theory for classifying countries according to their stages of growth and for analyzing the determinants of growth in and between the different stages. {{p}} We conclude that, even if they have inefficient institutions and policies, poorer countries can achieve rapid growth by adopting the technologies and managerial practices of countries like the United States. As they become richer, however, their growth rates will decline unless these countries have efficient institutions and policies. For many countries, this requires that they undertake serious institutional and policy reforms. {{p}} Our analysis further suggests that world economic leadership is unlikely to be provided by less-developed countries like China.
    Date: 2016–03–22
  8. By: Takumi Motoyama (Graduate School of Economics, Osaka University)
    Abstract: This study examines the process of economic development in an overlapping generations model where higher physical capital involves pollution and deteriorates the productivity of education. In this setting, households may not invest into education and multiple steady states of the physical/human capital ratio can arise, leading long-run production with low initial endowment (physical capital) to be higher than that with high initial endowment. This occurs because, owing to the low productivity of education caused by pollution, only physical capital accumulation occurs with high initial endowment, while physical and human capital accumulation occur with low initial endowment. This result is consistent with the resource curse. We also show that higher abatement technology can solve the resource curse problem since it helps households redirect physical capital accumulation toward human capital accumulation.
    Keywords: Semiconductor Human capital, Pollution, Resource curse
    JEL: I15 O13 Q52
    Date: 2016–03
  9. By: Pritha Dev (Indian Institute of Management Ahmedabad, Vastrapur); Blessing U. Mberu (APHRC); Roland Pongou (Department of Economics, University of Ottawa)
    Abstract: We study the causes of inequality in human capital accumulation across ethnic and religious groups. An overlapping generations model in which agents decide how much time to invest in human capital versus ethnic capital shows that the demand for human capital is affected positively by parental and group’s older cohort human capital, and negatively by group size. Two ex-ante identical groups may diverge in human capital accumulation, with the divergence mostly occurring among their low-ability members. Furthermore, group and ethnic fragmentation increases the demand for human capital. We validate these predictions using household data from Nigeria where ethnicity and religion are the primary identity cleavages. We document persistent ethnic and religious inequality in educational attainment. Members of ethnic groups that historically converted to Christianity outperform those whose ancestors converted to Islam. Consistent with theory, there is little difference between the high-ability members of these groups, but low-ability members of historically Muslim groups choose Koranic education as an alternative to formal education, even when formal education is free. Moreover, more religiously fragmented ethnic groups fare better, and local ethnic fragmentation increases the demand for formal education. Our analysis sheds light on the political context that underlies the recent violent opposition to "western education" in this country.
    Keywords: Group Inequality, Human Capital, Ethnic Capital, Ethnic networks, Ethnic Politics, Koranic Education
    JEL: A13 D9 I21 I24 N3 O1
    Date: 2015
  10. By: Pedro Mazeda Gil (University of Porto, Faculty of Economics, and CEF.UP - Center for Economics and Finance at University of Porto); Oscar Afonso (University of Porto, Faculty of Economics, and CEF.UP - Center for Economics and Finance at University of Porto); Paulo Brito (ISEG (School of Economics and Management) and UECE (Research Unit on Complexity and Economics), Universidade de Lisboa)
    Abstract: Europe's “2020 Strategy” has the main goal of stimulating economic growth by increasing the weight of the high-tech sector and the share of high-skilled workers. However, cross-country European data is at odds with that strategy: the relationship between economic growth and both the technology structure and the skill structure is statistically insignificant, although the last two are positively related. We investigate an analytical mechanism that connects these facts by extending a directed technical change growth model in several directions. We take the model to the data by calibrating it after the estimation of key structural relationships with cross-country data. When we allow for high relative barriers to entry into the high-tech sector and scale effects on growth we are able to replicate the empirical relationships. We derive quantitative policy implications on the effects of education policy on economic growth when leveraged by industrial policy aiming to reduce barriers to entry into the high-tech sector.
    Keywords: growth, high skilled, high tech, scale effects, directed technical change.
    JEL: O41 O31
    Date: 2014–09
  11. By: Renata Targetti Lenti
    Abstract: The paper is a critical review of Piketty’s book “Capital in the XXI Century”. The book provides a general theory of the functioning of a capitalist economy. Piketty’s intent is to link the functional and personal income distribution to the economic growth. The setting can be called "classic". However Piketty is not interested in explaining the role of capital accumulation on economic growth, but instead the inverse relation, that is the role of economic growth on the increase of the returns to capital, on the concentration of wealth and of income’s inequality in capitalist economies. In this review Piketty’s framework is discussed arguing that it can explain only partially level and changes of the personal income distribution. The factors which explain the dynamic of wealth (accumulation of capital) are different from those which explain the dynamics of labor income (demand and supply of skills and education, technology). It is very difficult, therefore, to reach a consensus on a shared theory of personal income distribution. Piketty links in a very innovative way the returns from capital r to the rate of growth of national income g comparing them in a macroeconomic framework. He claims that when returns on capital rise more quickly than the overall economy and taxes on capital remain low, a vicious circle of ever-growing dynastic wealth, and growing inequality, takes place. However the fact that r exceeds g explains nothing about the rise in inequality. An analysis of the generation of personal incomes, and consequently of inequality, requires a suitable framework that links personal endowments to incomes. At the end I will indicate some steps that could be required by framework suitable to analyze the personal income generation process.
    Keywords: Capitalism, Inequality, Income Distribution
    JEL: P16 P48 D31
  12. By: Lucas Bretschger (ETH Zürich, Switzerland); Simone Valente (University of East Anglia, United Kingdom)
    Abstract: We build a two-country model of endogenous growth to study the welfare effects of taxes on tradable primary inputs when countries engage in asymmetric trade. We obtain explicit links between persistent gaps in productivity growth and the incentives of resource exporting (importing) countries to subsidize (tax) domestic resource use. The exporters' incentive to subsidize hinges on slower productivity growth and is disconnected from the importers' incentive to tax resource inflows i.e., rent extraction. Moreover, faster productivity growth exacerbates the im- porters' incentive to tax, beyond the rent-extraction motive. In a strategic tax game, the only equilibrium is of Stackelberg type and features, for a wide range of parameter values, positive exporters' subsidies and importers' taxes at the same time. The model predictions concerning the impact of resource taxes on relative income shares are supported by empirical evidence.
    Keywords: Productivity Gaps, Endogenous Growth, International Trade, Tax Policy
    JEL: O40 F43
    Date: 2016–03
  13. By: Shima'a Hanafy (University of Marburg)
    Abstract: This paper investigates the effect of sectoral foreign direct investment (FDI) on economic growth in Egypt, using a novel panel dataset of 26 Egyptian governorates for the period 1992–2007. The growth literature is robust with the benefits of using a within-country dataset for such a research question (Ford et al., 2008). Despite the large number of theoretical models on the channels through which FDI can enhance economic growth, empirical findings are still inconclusive. We argue that one possible reason for the ambiguous effect is the use of aggregate FDI data across different sectors. Our results show no significant effect of aggregate FDI stock on economic growth in Egyptian governorates, which can be partly explained by the contradictory growth effects of FDI at the sectoral level. We find a positive effect of manufacturing FDI, a negative effect of agricultural FDI and no significant effect of services FDI on economic growth.
    Keywords: Foreign direct investment; sectoral FDI; economic growth; Egypt
    JEL: B59 C61 D21 D69
    Date: 2015
  14. By: Asongu, Simplice A.; Kodila-Tedika, Oasis
    Abstract: We explore a newly available dataset on quality of growth to investigate the effect of institutions on growth quality in 93 developing countries for the period 1990 to 2011. Quality of institutions is measured in term of political risk. The empirical evidence is based on: (i) Ordinary Least Squares (OLS) and Two Stage Least Squares (2SLS) and (ii) cross-sectional and panel data structures. In order to avail room for more policy implications, the dataset is further disaggregated into income levels, namely: Lower middle income (LMIC), low income (LI) and upper middle income (UMIC). Three main findings are established. First, institutions are positively related to the quality of growth. Second, institutions have significantly contributed to growth quality in increasing order during the following time intervals: 2005-2011, 1995-1999 and 2000-2004. Third, the positive nexus between institutions and growth quality is fundamentally driven by LMIC. Policy implications are discussed.
    Keywords: Quality of growth; Institutions; Social indicators.
    JEL: I10 O40 O55
    Date: 2015–09
  15. By: Miguel Casares (Department of Economics, Universidad Pública de Navarra); Hashmat U. Khan (Department of Economics, Carleton University)
    Abstract: We document empirical evidence on the determinants of U.S. regional growth over the last 25 years, with a special attention to the role of entrepreneurial activity or `business dynamism'. The main data source is the Business Dynamics Statistics (BDS) released by the U.S. Census Bureau. The key findings are: i) business entry and exit rates are similarly distributed across states, ii) neither entry nor exit rates have had a significant impact on regional growth, iii) higher business density results in faster regional growth, iv) entry rates have fallen over time and the states with greater business detrending have had weaker economic growth, v) states where entry and exit show substantial comovement (business churning) tend to grow faster, especially after 2007, vi) state-level population growth has no substantial effect on regional growth, and vii) the convergence hypothesis holds across the states of the U.S.
    Keywords: Business dynamism; Entry-exit rates; Economic growth
    JEL: O30 O40 O51
    Date: 2016–03

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