nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒04‒16
fourteen papers chosen by
Marc Klemp
Brown University

  1. The legacy of historical conflict: evidence from Africa By Timothy Besley; Marta Reynal-Querol
  2. Clans, Guilds, and Markets: Apprenticeship Institutions and Growth in the Pre-Industrial Economy By de la Croix, David; Doepke, Matthias; Mokyr, Joel
  3. The Effect of Aid on Growth: Evidence from a Quasi-Experiment By Sebastian Galiani; Stephen Knack; Lixin Colin Xu; Ben Zou
  4. A Conceptual Framework for Understanding Critical Transitions By Lee J. Alston; Marcus André Melo; Bernardo Mueller; Carlos Pereira
  5. Dynastic Altruism, Population Growth, and Economic Prosperity By Bharat Diwakar; Gilad Sorek
  6. Human-Capital Spillover, Population, and Economic Growth By Bharat Diwakar; Gilad Sorek
  7. From Physical to Human Capital Accumulation: Effects of Mortality Changes By Keiya Minamimura; Daishin Yasui
  8. The Evolution of the Natural Resource Curse Thesis: A Critical Literature Survey By Ramez Badeed; Hooi Hooi Lean; Jeremy Clark
  9. Human Capital and Innovation in a Monetary Schumpeterian Growth Model By Angus C., Chu; Lei, Ning; Dongming, Zhu
  10. Burying the Bumblebee Once and for All: By Bergh, Andreas; Bjørnskov, Christian
  11. the impact of corruption in economic growth in OIC countries By BASEM ERTIMI
  12. A re-examination of the long-run effect of capital account liberalization on growth By Hichem Saidi
  13. Sub-national Tax Policy and State Level Growth Dynamics: Evidence from U.S. States By William Gbohoui (Sans nom); François Vaillancourt
  14. ‘Smart development’. An essay on a new political economy of the environment By Tausch, Arno

  1. By: Timothy Besley; Marta Reynal-Querol
    Abstract: This article exploits variation between and within countries to examine the legacy of recorded conflicts in Africa in the precolonial period between 1400 and 1700. There are three main findings. First, we show that historical conflict is correlated with a greater prevalence of postcolonial conflict. Second, historical conflict is correlated with lower levels of trust, a stronger sense of ethnic identity, and a weaker sense of national identity across countries. Third, historical conflict is negatively correlated with subsequent patterns of development looking at the pattern across grid cells within countries.
    Keywords: conflict; trust; identity
    JEL: N47 O55
    Date: 2014–05–02
  2. By: de la Croix, David (Université catholique de Louvain); Doepke, Matthias (Northwestern University); Mokyr, Joel (Northwestern University)
    Abstract: In the centuries leading up to the Industrial Revolution, Western Europe gradually pulled ahead of other world regions in terms of technological creativity, population growth, and income per capita. We argue that superior institutions for the creation and dissemination of productive knowledge help explain the European advantage. We build a model of technological progress in a pre-industrial economy that emphasizes the person-to-person transmission of tacit knowledge. The young learn as apprentices from the old. Institutions such as the family, the clan, the guild, and the market organize who learns from whom. We argue that medieval European institutions such as guilds, and specific features such as journeymanship, can explain the rise of Europe relative to regions that relied on the transmission of knowledge within extended families or clans.
    Keywords: dissemination of knowledge, guilds, clans, apprenticeship
    JEL: E02 J24 N10 N30 O33 O43
    Date: 2016–03
  3. By: Sebastian Galiani; Stephen Knack; Lixin Colin Xu; Ben Zou
    Abstract: The literature on aid and growth has not found a convincing instrumental variable to identify the causal effects of aid. This paper exploits an instrumental variable based on the fact that since 1987, eligibility for aid from the International Development Association (IDA) has been based partly on whether or not a country is below a certain threshold of per capita income. The paper finds evidence that other donors tend to reinforce rather than compensate for reductions in IDA aid following threshold crossings. Overall, aid as a share of gross national income (GNI) drops about 59 percent on average after countries cross the threshold. Focusing on the 35 countries that have crossed the income threshold from below between 1987 and 2010, a positive, statistically significant, and economically sizable effect of aid on growth is found. A one percentage point increase in the aid to GNI ratio from the sample mean raises annual real per capita growth in gross domestic product by approximately 0.35 percentage points.
    JEL: O1 O4
    Date: 2016–04
  4. By: Lee J. Alston; Marcus André Melo; Bernardo Mueller; Carlos Pereira
    Abstract: Critical transitions for a country are historical periods when the powerful organizations in a country shift from one set of beliefs about how institutions (the formal and informal rules of the game) will affect outcomes to a new set of beliefs. Critical transitions can lead a country toward more openness politically and economically or toward a more exclusionary society. Economic and political development is contextual; that is, there is no recipe. Periods of relative persistence are the norm with changes in institutions at the margin. We develop a framework consisting of several interconnected relatively unexplored concepts that we first define in a static context and then utilize to show how they produce a dynamic of institutional change or persistence. The key concepts include: windows of opportunity, beliefs, and leadership. Our major contribution is wedding the concepts of windows of opportunity, beliefs, and leadership to the dominant network, institutions, and economic and political outcomes to form a dynamic. We apply the framework illustratively to understand economic and political development in Argentina over the past 100 years.
    JEL: N4 O10
    Date: 2016–04
  5. By: Bharat Diwakar; Gilad Sorek
    Abstract: We show that non-linear dynastic altruism toward future generations yields non-monotonic relation between population growth and economic prosperity, which is polynomial in general. The exact shape of this non-monotonic relation depends on the concavity of parental altruistic utility. Hence, this work contributes to the recent line of modified R&D-based growth models, aimed to align theory with empirical evidence on non-linear relation between population growth and economic prosperity.
    Keywords: Dynastic Altruism; Population Growth; Technological Progress
    JEL: O31 O40
    Date: 2016–03
  6. By: Bharat Diwakar; Gilad Sorek
    Abstract: We study two-sector R&D model with endogenous human capital accumulation. Allowing for fractional human capital spillover from parents to their o¤spring, which are subject to congestion in fertility rate, we establish non-monotonic relations between population growth and economic growth. These non-monotonic relations, which are polynomial in general, are determined by the base level of human capital spillover and the magnitude of the congestion e¤ect: a U shape relation can arise under low congestion factor, whereas a hump shape may present for high congestion factor.
    Keywords: Innovation-Based Growth; Population Growth; Human-Capital Spillover
    JEL: O31 O40
    Date: 2016–03
  7. By: Keiya Minamimura (Graduate School of Economics, Kobe University); Daishin Yasui (Graduate School of Economics, Kobe University)
    Abstract: This paper develops a growth model `a la Galor and Moav (Review of Economic Studies 71(4):1001?1026, 2004) that captures the replacement of physical capital accumulation by human capital accumulation as the prime engine of growth. We show that (i) decreased mortality promotes this replacement, and (ii) the effect of a decrease in mortality on percapita income differs across the phases of the development process. A notable prediction of our theory is that the higher the level of education in an economy, the more likely it is that a decrease in mortality will increase income per capita. Using finite mixture models, we show that this prediction is supported by the data.
    Date: 2016–04
  8. By: Ramez Badeed; Hooi Hooi Lean; Jeremy Clark (University of Canterbury)
    Abstract: This paper surveys the literature of the natural resource curse hypothesis. We review the theoretical mechanisms through which natural resource wealth might slow economic growth, and then the empirical studies that test for an effect overall, or an effect on factors typically associated with economic growth. We also review more recent studies suggesting that the findings supporting the resource curse may reflect only empirical mis-specification. The literature has produced conflicting evidence, with no consensus on the net effect of natural resources in an economy. Overall we argue that evidence for a negative effect of natural resource dependence on economic growth remains convincing, particularly for developing economies and particularly working through factors closely associated with growth. We take recent contrarian studies to demonstrate, however, both that a resource curse is not inevitable, and that future studies should better address issues of endogeneity of dependence measures, years of study, and potential non-monotonic relationships.
    Keywords: natural resource curse; natural resource dependence; natural resource abundance; economic growth; literature survey
    JEL: O13 O47 Q32 Q33
    Date: 2016–04–07
  9. By: Angus C., Chu; Lei, Ning; Dongming, Zhu
    Abstract: This study explores the growth and welfare effects of monetary policy in a scale-invariant Schumpeterian growth model with endogenous human capital accumulation. We model money demand via a cash-in-advance (CIA) constraint on R&D investment. Our results can be summarized as follows. We find that an increase in the nominal interest rate leads to a decrease in R&D and human capital investment, which in turn reduces the long-run growth rates of technology and output. This result stands in stark contrast to the case of exogenous human capital accumulation in which the long-run growth rates of technology and output are independent of the nominal interest rate. Simulating the transitional dynamics, we find that the additional long-run growth effect under endogenous human capital accumulation amplifies the welfare effect of monetary policy. Decreasing the nominal interest rate from 10% to 0% leads to a welfare gain that is equivalent to a permanent increase in consumption of 2.82% (2.38%) under endogenous (exogenous) human capital accumulation.
    Keywords: monetary policy, economic growth, R&D, human capital
    JEL: E41 O3 O4
    Date: 2016–03
  10. By: Bergh, Andreas (Research Institute of Industrial Economics (IFN)); Bjørnskov, Christian (Aarhus University)
    Abstract: High levels of social trust has been linked to both public sector size and long term economic growth, thereby helping to explain how some countries are able to combine high taxes and relatively high levels of economic growth. This paper examines if social trust as a background factor also insulates countries against negative effects of public sector size on growth, as government size and growth are found to be negatively associated in several recent studies. We note that the effect is theoretically ambiguous. In panel data from 66 countries across 40 years, we find little robust evidence of insulating effects. Instead we find robust evidence that high trust aggravates the crowding out effects of public sector size on private investments.
    Keywords: Tust; Economic growth; Government consumption
    JEL: H10 O11 P16 Z10
    Date: 2016–03–21
    Abstract: Economic growth in a country can be attributed to many variables, both positive and negative. Raising the level of human capital, openness and investment are examples of factors typically considered to have a positive impact on economic progress, while corruption is one of the factors that are often seen as detrimental to economic growth. The purpose of this study is to analyse whether the levels of perceived corruption in a cross-section of countries have affected their economic growth rates over the years 2003-2010. The study is conducted with a regression on a sample of 14 countries and eight variables for the time period in question. The models are constructed on the basis of the endogenous growth theory. Results using economic freedom index (EFI) have the expected outcome which refers that corruption has a negative impact of economic growth in the countries in question.
    Keywords: corruption, economic growth, rent seeking.
    JEL: A10 A10
  12. By: Hichem Saidi (ESCT Business School of Tunis)
    Abstract: This paper attempts to fill a gap in the existing literature in investigating the long-run relationship between Capital Account Liberalization (hereafter CAL) and economic growth in a panel of 79 developed and developing countries during the period 1983-2013. Using recently developed panel econometric techniques of Westerlund and Edgerton (2008), the present paper takes into account structural breaks and cross-section dependence and regime shifts when analysing the CAL- growth nexus. We find, using the Fully Modified Ordinary Least Square (FMOLS) and the Dynamic Ordinary Least Square (DOLS), that CAL and economic growth are cointegrated and move together in the “long run†. We demonstrate that capital account liberalization boosts growth in advanced countries but slows it in developing and emerging countries. Overall, the results support CAL in developed, emerging and developing economies.
    Keywords: Capital Account Liberalization, Economic Growth, Panel Cointegration, Structural Breaks, Cross-Section Dependence, FMOLS and DOLS
    JEL: F02 F43 P16
  13. By: William Gbohoui (Sans nom); François Vaillancourt
    Abstract: To understand the role of subnational tax policies in explaining regional growth, we present stylized facts on U.S. state income and state-level tax policies. We use real Gross State Products (GSP) as the indicator of economic performance in contrast to the existing literature, which relies on Personal Income. The results reveal an increase in per capita income disparities, and time - persistent differences in human capital and physical capital between U.S. states. In addition, we find that subnational tax policies vary widely between states. Using augmented Barro regressions, we show that educational attainment, and state-level tax policies are the key determinants in explaining the differences between state-level economic growth. More precisely, higher corporate income or general sales taxes significantly retard economic growth, while human capital positively impacts state-level growth.
    Keywords: Regional growth, state and local taxation,
    JEL: H71 R11
    Date: 2016–03–29
  14. By: Tausch, Arno
    Abstract: In this book, we present a first empirical reflection on ‘smart development’, its measurement and its possible ‘drivers’ and ‘bottlenecks’. We first provide cross-national data, how much ecological footprint is used in the nations of the world system to ‘deliver’ a given amount of democracy, economic growth, gender equality, human development, research and development, and social cohesion. To this end, we first developed UNDP-type performance indicators from current standard international comparative, cross-national social science data on these six main dimensions of development and on the combined performance on the six dimensions (a UNDP type ‘human development index plus’). We then show the non-linear standard OLS regression trade-offs between ecological footprints per capita and their square on these six components of development and the overall super-UNDP development performance index, derived from them. The residuals from these regressions are our new measures of smart development: a maximum of democracy, economic growth, gender equality, human development, research and development, social cohesion, and their combination with a minimum of ecological footprint. Our estimates underline the enormous importance of the positive effects of received worker remittances on smart development.
    Keywords: C43 - Index Numbers and Aggregation Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth F22 - International Migration F-24 – Remittances
    JEL: C43 F22 F24 Q56
    Date: 2016–03–22

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