nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒05‒14
fourteen papers chosen by
Marc Klemp
Brown University

  1. Culture, Diffusion, and Economic Development By Ani Harutyunyan; Ömer Özak
  2. State capacity and public goods: institutional change, human capital and growth in early modern Germany By Jeremiah Dittmar; Ralf R. Meisenzahl
  3. A Suicidal Kuznets Curve? By Antonakakis, Nikolaos; Collins, Alan
  4. Newer Need Not be Better: Evaluating the Penn World Tables and the World Development Indicators Using Nighttime Lights By Maxim Pinkovskiy; Xavier Sala-i-Martin
  5. Did the agrarian product decrease in early modern Europe? The case of Castile By Enrique Llopis; José Antonio Sebastián; Vanesa Abarca; José Ubaldo Bernardos; Ángel Luis Velasco
  6. The rise of the service economy and the real return on capital By Miguel Leon-Ledesma; Alessio Moro
  7. Economic Gains for U.S. States from Educational Reform By Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
  8. Institutions, Poverty and Economic Performance in Eastern Africa By Kebede, Temesgen
  9. Natural Assets: Surfing a wave of economic growth By Thomas McGregor; Samuel Wills
  10. Stagnation traps By Gianluca Benigno; Luca Fornaro
  11. Endogenous Institutions and Economic Outcomes. By Guerriero, Carmine
  12. Rising Population and Food Insecurity Linkages in Pakistan: Testing Malthusian Population Growth Theory By Ahmad, Khalil; Ali, Amjad
  13. Public debt and economic growth: An empirical evaluation By María del Carmen Ramos-Herrera; Simón Sosvilla-Rivero
  14. Take What You Can: Property Rights, Contestability and Conflict By Thiemo Fetzer; Samuel Marden

  1. By: Ani Harutyunyan (LICOS - Centre for Institutions and Economic Performance at KU Leuven); Ömer Özak (Southern Methodist University)
    Abstract: This research explores the effects of culture on technological diffusion and economic development. It shows that culture's direct effects on development and barrier effects to technological diffusion are, in general, observationally equivalent. In particular, using a large set of cultural measures, it establishes empirically that pairwise differences in contemporary development are associated with pairwise cultural differences relative to the technological frontier, only in cases where observational equivalence holds. Additionally, it establishes that differences in cultural traits that are correlated with genetic and linguistic distances are statistically and economically significantly correlated with differences in economic development. These results highlight the difficulty of disentangling the direct and barrier effects of culture, while lending credence to the idea that common ancestry generates persistence and plays a central role in economic development.
    Keywords: Comparative economic development, economic growth, culture, barriers to technological diffusion, genetic distances, linguistic distances
    JEL: O10 O11 O20 O33 O40 O47 O57 Z10
    Date: 2016–04
  2. By: Jeremiah Dittmar; Ralf 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: G18 L15 O47
    Date: 2016–03
  3. By: Antonakakis, Nikolaos; Collins, Alan
    Abstract: In 1955 Simon Kuznets hypothesized an inverted U-shaped relationship between economic growth and income inequality. Environmental and obesity variants substitute pollution and body mass metrics for income inequality. Graphical depictions of both feature widely in economic literature. In this study, we investigate the existence (or lack thereof) of a suicidal Kuznets curve. Controlling for several country-specific socioeconomic suicide determinants among 73 countries over the period 1990-2010, we find evidence of an N-shaped suicidal Kuznets curve between per capita income and suicide rates of the male population of 25-34, 34-54 and 55-74 age groups and the female population of the 55-74 age group. The turning points of per capita income for the male population of 25-34, 34-54 and 55-74 age groups are $7,727 and $46,306, $5,266 and $22,726, and $3,459 and $53,260, respectively, while for the female population of the 55-74 age groups are $4,022 and $43,351. On average and across both genders, as per capita income increases, suicide rates for those aged 25-34 and 35-54 follow an increasing trend and peak when per capita income reaches $7,304 and $6,498, respectively, then follow a declining trend until $60,819 and $25,129, respectively, and increase thereafter again. These results remain robust to a battery of robustness checks.
    Keywords: Suicide, GDP growth, Kuznets curve, Unemployment, Fertility, Life expectancy
    JEL: C33 E32 I15 I31 J13
    Date: 2016–05–06
  4. By: Maxim Pinkovskiy; Xavier Sala-i-Martin
    Abstract: Nighttime lights data are a measure of economic activity whose error is plausibly independent of the measurement errors of most conventional indicators. Therefore, we can use nighttime lights as an independent benchmark to assess existing measures of economic activity (Pinkovskiy and Sala-i-Martin (2016)). We employ this insight to find out which vintages of the Penn World Tables and of the World Development Indicators better estimate true income per capita. We find that revisions of the PWT do not necessarily dominate their predecessors in terms of explaining nighttime lights (and thus, predicting unobserved true income). In particular, we find that the PWT 7.1 chain-based GDP series substantially outperforms the constant-price series in both PWT 8.0 and PWT 8.1, the two most recent vintages of the PWT. We additionally find that the World Development Indicators are as good, and often better, measures of unobserved true income as are any recent vintages of the Penn World Tables. Furthermore, we find that each new round of the International Comparisons Programme (ICP) has improved the WDI's ability to predict log unobserved true income. We also find that vintages tend to be good or bad at predicting unobserved true income roughly equally across the sample period, and do not tend to be particularly good at predicting unobserved income in the year of their price survey. We conclude that GDP series based on unadjusted domestic growth rates alone predict growth rates of true income better than series based on PPP adjustments to growth rates.
    JEL: O0 O4 O40
    Date: 2016–05
  5. By: Enrique Llopis (Universidad Complutense de Madrid,Spain); José Antonio Sebastián (Universidad Complutense de Madrid,Spain); Vanesa Abarca (Universitat de Barcelona, Spain); José Ubaldo Bernardos (Universidad Nacional de Educación a Distancia, Spain); Ángel Luis Velasco (Universidad Nacional de Educación a Distancia, Spain)
    Abstract: This work quantifies the growth of agricultural product and per capita agricultural product in four provinces of Castile between the late sixteenth century and the third quarter of the eighteenth century. For this purpose we have resourced to tithe documentation generated by the dioceses of Avila, Burgos, Salamanca and Segovia for the distribution of the Subsidio and the Excusado. Our most noticeable conclusion is that the negative image shown by some of the recent literature on the evolution of the primary sector in Castile in the seventeenth and eighteenth centuries is at odds with the evidence. Between 1588-1592 and 1771-1775, both the agricultural product and per capita agricultural product, far from declining, grew in the aforementioned region.
    Keywords: Agrarian Product; Tithes; Castile; Europe; Early Modern Period
    JEL: N13 N53 Q11
    Date: 2016–04
  6. By: Miguel Leon-Ledesma; Alessio Moro
    Abstract: We use a two-sector model of structural transformation and balanced growth to show that the real interest rate, measured as the return on capital in units of GDP or in units of aggregate consumption, declines as income grows. This is due to the differential TFP growth in the goods producing sector relative to the services sector. This differential drives a relative price change that triggers a steady decline in the rate of return on capital along the growth path. We calibrate the model to U.S. data to reproduce the behavior of GDP, the share of services in consumption, the relative price goods/services and the investment/output ratio in the period 1950-2015. We find that the calibrated model displays a decline of the real interest rate of 36% in terms of units of GDP and of 43% in terms of units of aggregate consumption during the period considered.
    Keywords: Structural transformation; productivity of capital; two-sector model
    JEL: E22 E24 E31 O41
    Date: 2016–05
  7. By: Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
    Abstract: There is limited existing evidence justifying the economic case for state education policy. Using newly-developed measures of the human capital of each state that allow for internal migration and foreign immigration, we estimate growth regressions that incorporate worker skills. We find that educational achievement strongly predicts economic growth across U.S. states over the past four decades. Based on projections from our growth models, we show the enormous scope for state economic development through improving the quality of schools. While we consider the impact for each state of a range of educational reforms, an improvement that moves each state to the best-performing state would in the of long-run economic gains of over four times current GDP.
    Date: 2016–04
  8. By: Kebede, Temesgen
    Abstract: East African countries are poor due to several factors particularly due to vicious circle of poverty prevalence, conflict and civil war trap, natural resource trap, land locked with bad neighbors and bad governance. These are traps discouraging the incentive for economic growth and brought about poor performance of the economy; thus, leads to difference in income associated with difference in institutional arrangement and structure. The average per capita income of the region is $333 with minimum average of $82.64 and maximum average of $882.46. Dummy intercept indicated that each country has its own unique features. On average, Kenya is performing better from members in the region followed by Tanzania, Rwanda and Eritrea respectively. Panel data technique is employed to identify factors affecting economic performance of the region and the random effects outcome shows that investment, inflation and exploded population growth affects economic performance.
    Keywords: Poverty, Institution, Economic Performance, East Africa, Panel Data, Institutional and Behavioral Economics, Public Economics,
    Date: 2014–07
  9. By: Thomas McGregor; Samuel Wills
    Abstract: Many natural assets can not be valued at market prices. Non-market valuations typically focus on the value of an individual asset to an individual user, ignoring macroeconomic spillovers. We estimate the contribution of a natural asset to aggregate economic activity by exploiting exogenous variation in the quality of surfing waves around the world, using a global dataset covering over 5,000 locations. Treating night-time light emissions as a proxy for economic activity we find that high quality surfing waves boost activity in the local area (
    Keywords: Non-market valuation, natural capital, surfing, night-time lights
    JEL: H41 O13 Q26 Q51 Q56
    Date: 2016
  10. By: Gianluca Benigno; Luca Fornaro
    Abstract: We provide a Keynesian growth theory in which pessimistic expectations can lead to very persistent, or even permanent, slumps characterized by unemployment and weak growth. We refer to these episodes as stagnation traps, because they consist in the joint occurrence of a liquidity and a growth trap. In a stagnation trap, the central bank is unable to restore full employment because weak growth depresses aggregate demand and pushes the interest rate against the zero lower bound, while growth is weak because low aggregate demand results in low profits, limiting firms' investment in innovation. Policies aiming at restoring growth can successfully lead the economy out of a stagnation trap, thus rationalizing the notion of job creating growth.
    Keywords: secular stagnation; liquidity traps; growth traps; endogenous growth; multiple equilibria
    JEL: J1 N0
    Date: 2016–02
  11. By: Guerriero, Carmine
    Abstract: This paper evaluates the relative importance of a "culture of cooperation," understood as the implicit reward from cooperating in prisoner's dilemma and investment types of activities, and "inclusive political institutions," which enable the citizenry to check the executive authority. I divide Europe into 120 km X 120 km grid cells, and I exploit exogenous variation in both institutions driven by persistent medieval history. To elaborate, I document strong first-stage relationships between present-day norms of trust and respect and the severity of consumption risk-i.e., climate volatility-over the 1000-1600 period and between present-day regional political autonomy and the factors that raised the returns on elite-citizenry investments in the Middle Ages, i.e., the terrain ruggedness and the direct access to the coast. Using this instrumental variables approach, I show that only culture has a first order effect on development, even after controlling for country fixed effects, medieval innovations, the present-day role of medieval geography, and the factors modulating the impact of institutions. Crucially, the excluded instruments have no direct impact on development, and the effect of culture holds within pairs of adjacent grid cells with different medieval climate volatility. An explanation for these results is that culture, but not a more inclusive political process, is necessary to produce public-spirited politicians and push voters to punish political malfeasance. Micro-evidence from Italian Parliament data supports this idea.
    Keywords: Geography; Culture; Democracy; Development; Political Accountability.
    JEL: D7 H1 O1 Z1
    Date: 2013–07–15
  12. By: Ahmad, Khalil; Ali, Amjad
    Abstract: Specific amount of food and safe drinking water are basic necessities of living human-beings. The human population of the universe is touching its highest level and counted more than seven billion, it is going towards facing a great famine as predicated by Malthus (1798) . The positive and preventive checks of Malthus (1798) can be observed empirically in different parts of the world (Swaminathan and Feng 1994). The study has tested the population theory of Malthus in case of Pakistan. For investigating the long run relationship among the variables of the model Johanson cointegration technique is applied. For examining the short run dynamic Error Correction Model (ECM) is applied. The results of the study of the study supported that the Malthusian theory about the population and income growth in the case of Pakistan. Furthermore, higher population growth rate increases the food insecurity not only in long run but also in short run in case of Pakistan.
    Keywords: population growth, food insecurity, gross domestic product, consumer price index
    JEL: E01 E31 Q18 Q56
    Date: 2016–01
  13. By: María del Carmen Ramos-Herrera (Department of Quantitative Economics, Universidad Complutense de Madrid); Simón Sosvilla-Rivero (Department of Quantitative Economics, Universidad Complutense de Madrid)
    Abstract: Based on a data set of 115 economies, this paper empirically investigates the relation between public debt and economic growth. We find that those countries that present low public debt are characterized by higher economic growth, while the smallest growth rates are associated with high public debt. Nevertheless, this conclusion is tempered when we analyse the countries by income level: low-income countries have a different behaviour with respect to lower-middle, upper-middle and high income countries.
    Keywords: Public debt, economic growth
    JEL: C32 H63 O40 O57
    Date: 2016–06
  14. By: Thiemo Fetzer; Samuel Marden
    Abstract: Weak property rights are strongly associated with underdevelopment, low state capacity and civil conflict. In economic models of conflict, outbreaks of violence require two things: the prize must be both valuable and contestable. This paper exploits spatial and temporal variation in contestability of land title to explore the relation between (in)secure property rights and conflict in the Brazilian Amazon. Our estimates suggest that, at the local level, assignment of secure property rights eliminates substantively all land related conflict, even without changes in enforcement. Changes in land use are also consistent with reductions in land related conflict.
    Keywords: property rights, land titling, conflict, deforestation
    JEL: O12 Q15 D74 Q23
    Date: 2016–04

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