nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒05‒28
fifteen papers chosen by
Marc Klemp
Brown University

  1. The Role of Crop Type in Cross-Country Income Differences By Eberhardt, Markus; Vollrath, Dietrich
  2. The implications of automation for economic growth and the labor share of income By Prettner, Klaus
  3. The Resource Curse Exorcised: Evidence from a Panel of Countries. By Brock Smith
  4. The Evolution of Human Capital in Africa, 1730 -1970: A Colonial Legacy? By Baten, Jörg; Cappelli, Gabriele
  5. Contractions in Chinese Fertility and Savings: Long run domestic and global implications By Jane Golley; Rod Tyers; Yixiao Zhou
  6. Labor Supply in the Past, Present, and Future: a Balanced-Growth Perspective By Timo Boppart; Per Krusell
  7. The steady-state growth conditions of neoclassical growth model and Uzawa theorem revisited By Li, Defu; Huang, Jiuli
  8. Energy consumption, economic growth, trade and financial development nexus in south asia By Siddique, Hafiz Muhammad Abubakar; Majeed, Muhammad Tariq
  9. Fertility, Longevity, and Capital Flows By Bárány, Zsófia; Coeurdacier, Nicolas; Guibaud, Stéphane
  10. The impact of government size and composition on growth in EU15 countries By Silvia Golem
  11. Technological change and productivity growth in the agrarian systems of New Zealand and Uruguay (1870-2010) By Jorge Álvarez
  12. On Monetary Policy, Unemployment, and Economic Growth By Rosas-Martinez, Victor H.
  13. Autonomous government expenditure growth, deficits, debt and distribution in a neo-Kaleckian growth model By Hein, Eckhard
  15. Unconditional Aid and Green Growth By Moutaz Altaghlibi; Florian Wagener

  1. By: Eberhardt, Markus; Vollrath, Dietrich
    Abstract: Labor productivity and labor share in the agricultural sector are key determinants of living standards across countries. We show that differences in agricultural technology -- the coefficients on factor inputs in the production function -- account for a substantial portion of cross-country differences in agricultural labor productivity, agricultural labor share, and per capita income. In a panel of 100 countries we document differences in technology estimates associated with major crops, and then illustrate the quantitative implications for development. Counterfactually eliminating crop-type technology heterogeneity reduces variance in log income per capita by 25%, and raises the median by 60%.
    Keywords: agricultural development; crop type; structural change; technology heterogeneity
    JEL: C23 F63 O11 O47 Q16
    Date: 2016–04
  2. By: Prettner, Klaus
    Abstract: We introduce automation into the standard Solovian model of capital accumulation and show that (i) there is the possibility of perpetual growth, even in the absence of technological progress; (ii) the long-run economic growth rate declines with population growth, which is consistent with the available empirical evidence; (iii) there is a unique share of savings diverted to automation that maximizes the long-run growth rate of the economy; (iv) the labor share declines with automation to an extent that fits to the observed pattern.
    Keywords: automation,robots,machine learning,perpetual economic growth,declining labor share,inequality
    JEL: O11 O33 O41
    Date: 2016
  3. By: Brock Smith
    Abstract: This paper evaluates the impact of major natural resource discoveries since 1950 on GDP per capita and its proximate causes. Using panel fixed-effects estimation and resource discoveries in countries that were not previously resource-rich as a plausibly exogenous source of variation, I find a positive effect on GDP per capita levels following resource exploitation that persists in the long term. Results vary significantly between OECD and non-OECD treatment countries, with effects concentrated within the non-OECD group. I further test GDP effects with synthetic control analysis on each individual treated country, yielding results consistent with the average effects found with the fixed-effects model. Productivity, capital formation and education were also positively affected by resource discovery, while growth accounting analysis suggests productivity gains were a major distinguishing factor in GDP effects.
    Keywords: natural resource curse, economic growth, growth regressions, growth accounting, oil
    JEL: F12 Q37
    Date: 2016
  4. By: Baten, Jörg; Cappelli, Gabriele
    Abstract: How did colonialism interact with the development of human capital in Africa? We create an innovative panel dataset on numeracy across African countries before, during and after the Scramble for Africa (1730 -1970) by drawing on new sources and by carefully assessing potential selection bias. The econometric evidence that we provide, based on OLS, 2SLS and Propensity Score Matching, shows that colonialism had very diverse effects on human capital depending on the education policy of the colonizer. Although the average marginal impact of colonialism on the growth of numeracy was positive, the premium that we find was driven by the British educational system. Especially after 1900, the strategies chosen by the British were associated with faster human-capital accumulation, while other colonies were characterized by a negative premium on the growth of education. We connect this finding to the reliance of British education policy on mission schools, which used local languages and the human capital of local teachers to expand schooling in the colonies. We also show that this, in turn, had long-lasting effects on economic growth, which persist to the present day.
    Keywords: Africa; Colonialism; Education Policy; Human Capital; Numeracy
    JEL: N37 O15
    Date: 2016–05
  5. By: Jane Golley (Centre for China in the World, Australian National University); Rod Tyers (Business School, University of Western Australia, Centre for Applied Macroeconomic Analysis, Australian National University); Yixiao Zhou (Department of Economics and Property, School of Economics and Finance, Business School, Curtin University)
    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.
    Date: 2016
  6. By: Timo Boppart; Per Krusell
    Abstract: What explains how much people work? Going back in time, a main fact to address is the steady reduction in hours worked. The long-run data, for the U.S. as well as for other countries, show a striking pattern whereby hours worked fall steadily by a little below a half of a percent per year, accumulating to about a halving of labor supply over 150 years. In this paper, we argue that a stable utility function defined over consumption and leisure can account for this fact, jointly with the movements in the other macroeconomic aggregates, thus allowing us to view falling hours as part of a macroeconomy displaying balanced growth. The key feature of the utility function is an income effect (of higher wages) that slightly outweighs the substitution effect on hours. We also show that our proposed preference class is the only one consistent with the stated facts. The class can be viewed as an enlargement of the well-known “balanced-growth preferences” that dominate the macroeconomic literature and that demand constant (as opposed to falling) hours in the long run. The postwar U.S. experience, over which hours have shown no net decrease and which is the main argument for the use of “balanced-growth preferences”, is thus a striking exception more than a representative feature of modern economies.
    JEL: E21 J22 O11 O40
    Date: 2016–05
  7. By: Li, Defu; Huang, Jiuli
    Abstract: Based on a neoclassical growth model including adjustment costs of investment, this paper proves that the essential condition for neoclassical model to have steady-state growth path is that the sum of change rate of the marginal efficiency of capital accumulation (MECA) and the rate of capital-augmenting technical change (CATC) be zero. We further confirm that Uzawa(1961)’s steady-state growth theorem that says the steady-state technical change of neoclassical growth model should exclusively be Harrod neutral, holds only if the marginal efficiency of capital accumulation is constant, which in turn implies that the capital supply should be infinitely elastic. Uzawa’s theorem has been misleading the development of growth theorem by not explicitly specifying this prerequisite, and thus should be revisited.
    Keywords: Neoclassical Growth Model; Uzawa’s Theorem; Direction of Technical Change; Adjustment Cost
    JEL: E13 O30 O41
    Date: 2016–05–21
  8. By: Siddique, Hafiz Muhammad Abubakar; Majeed, Muhammad Tariq
    Abstract: This study contributes to the literature by exploring the impact of energy consumption, trade and financial development on growth in five South Asian countries over 1980-2010. The panel co-integration approach is employed to examine the long run association and granger causality analysis for direction. The PMG estimation approach is used to address the problem of heterogeneity. Panel co-integration test expresses a long run relationship between growth, energy, trade and financial development. Our findings express that financial development, energy and trade positively affect the economic growth. In long run, bidirectional relationship exists among growth and energy, unidirectional causality is running from trade and financial development to growth.
    Keywords: economic growth, energy consumption, south asia
    JEL: A10
    Date: 2015
  9. By: Bárány, Zsófia (SciencesPo Paris); Coeurdacier, Nicolas (SciencesPo Paris and CEPR); Guibaud, Stéphane (SciencesPo Paris)
    Abstract: The neoclassical growth model predicts large capital flows towards fast-growing emerging countries. We show that incorporating fertility and longevity into a lifecycle model of savings changes the standard predictions when countries differ in their ability to borrow inter-temporally and across generations through social security. In this environment, global aging triggers capital flows from emerging to developed countries, and countries’ current account positions respond to growth adjusted by current and expected demographic composition. Data on international capital flows are broadly supportive of the theory. The fact that fast-growing emerging countries are also aging faster, while having less developed credit markets and pension systems, explains why they are more likely to export capital. Our quantitative multi-country overlapping-generations model explains a significant fraction of the patterns of capital flows, across time and across developed and emerging countries.
    Date: 2016–05
  10. By: Silvia Golem (Faculty of Economics University of Split)
    Abstract: The goal of this paper is to investigate the long-run effect of government size and composition on growth. Unlike previous studies, this paper employs an improved dataset and a more adequate econometric technique. Using pooled mean group (PMG) estimation approach, which is particularly suitable because it allows short-term adjustments and convergence speeds to vary across countries while imposing cross-country homogeneity restrictions on the long-run coefficients, we empirically test the relationship between growth and government size and its composition in developed European economies, over the period 1970 to 2014. The obtained results indicate that high aggregate spending levels are an impediment for growth in developed economies, while the single most important government expenditure item is - Education.
    Keywords: government size, GDP growth, PMG estimation, EU
    JEL: C33 H10 H50
  11. By: Jorge Álvarez (Programa de Historia Económica y Social, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: New Zealand and Uruguay were typical settler economies and were alike in many ways throughout their histories but there were also big differences in how they developed. They were similar as regards size of population, surface area, markets, natural resource endowments, production and trade specialization patterns and the fact that they both attained high levels of income per capita in the early 20th century. They differed in that they had divergent patterns of economic growth and different agricultural productivity growth rates for their main products (wool, meat, dairy produce and leather), which accounted for around 70% of their exports in the hundred years from 1870 to 1970. The main aim of this paper is to use a systematic case-oriented comparison and the evolutionary theoretical approach to technological change to understand the development of the technological trajectories that boosted productivity in the two countries’ pastoral systems in the long-term (1870-2010). I will analyse this in interaction with geographical environment, intensity of resource use (extensive or intensive) and the institutional environment in which technological innovations to raise land productivity were produced, disseminated and adapted. My main results show that in the 19th century Uruguay had more favourable conditions for pastoral production than New Zealand and, up to the 1930s, higher production volumes per hectare. New Zealand had higher growth rates in all livestock physical productivity indicators from 1870 to 1970 and overtook Uruguay’s levels by the mid 20th century. As regards increased land productivity, New Zealand changed completely from an extensive to an intensive pastoral system. This process required technology to improve the soil, thus increasing capital and job investment and changes to the original production function of the pastoral system. In Uruguay livestock rearing was based on natural pasture, extensive production systems and low capital investment, and this stable model remained the same for a relatively long time. This inertia meant that in the long run Uruguay’s technological trajectory lagged far behind New Zealand’s in the development of soil-improvement technologies. I argue that these differences have, through different channels, conditioned the export performance and the economic growth of both countries.
    Keywords: settler economies, technological change, pastoral production, productivity growth
    JEL: N56 N57 O13 O33
    Date: 2015–12
  12. By: Rosas-Martinez, Victor H.
    Abstract: Recognizing the possible relation between investments, economic growth and unemployment, and how there is not an established impact of an unlikely productive project failure on the secondly mentioned variables, we address such relation and asses theoretically the effect of different instruments of monetary policy on the mentioned macroeconomic indicators. To do this we modify two models of economic growth by considering the role of entrepreneurs, risk takers, and a monetary authority which is the average agent of the economy that is assumed to be aware of how the inflation can damage equally the individuals' life style, independently of their particular levels of income, finding that the impact of the monetary instruments depends on the behavior of the population.
    Keywords: Monetary Authority; Endogenous expansive policy; Inflation; Unemployment; Economic Growth
    JEL: E2 E5 O3 O4
    Date: 2016–01–19
  13. By: Hein, Eckhard
    Abstract: This paper is linked to some recent attempts at including a non-capacity creating autonomous expenditure category as the driver and determinant of growth into Kaleckian distribution and growth models. Whereas previous contributions have focussed on taming Harrodian instability, generated by the deviation of the goods market equilibrium rate of capacity utilisation from a normal or target rate of utilisation, we rather focus on the so far neglected issues of deficit, debt and distribution dynamics in such models. For this purpose we treat the growth of government expenditures on goods and services, financed by credit creation, as the exogenous growth rate driving the system. We examine the medium-run convergence of the system towards such a growth rate, analyse the related long-run debt dynamics and deal with stability and income distribution issues. Finally we touch upon the economic and, in particular, fiscal policy implications of our model results.
    Keywords: government deficits and debt,public expenditure growth,Kaleckian distribution and growth model
    JEL: E11 E12 E25 E62
    Date: 2016
  14. By: Richard G. Lipsey (Simon Fraser University)
    Abstract: Advocates of green-growth policies and those who advocate policies to stop growth both accept that the world faces serious environmental problems. They disagree on and debate about appropriate remedies. Green-growth advocates argue that it is possible to create a green economy compatible with sustained growth. The no-growth advocates argue that the whole growth process must be stopped if the planet is to be saved from catastrophe. This short paper argues that choosing the optimal policy for dealing with these serious problems does not require deciding which group is right. Instead it is argued that the optimal policy is to act as if the green-growth advocates are right and only if they are proved wrong by the failure of their policies to do the job, should no-growth policies be attempted.
    Keywords: climate change, green growth, no-growth policies, environmental policies, carbon pricing.
    JEL: Q28 Q38 Q48
    Date: 2016–04
  15. By: Moutaz Altaghlibi (University of Amsterdam, the Netherlands, and Université Paris 1 Panthéon-Sorbonne, France); Florian Wagener (University of Amsterdam, the Netherlands)
    Abstract: Environmentally motivated aid can help developing countries to achieve economic growth while mitigating the impact on emission levels. We argue that the usual practice of giving aid conditionally is not effective, and we therefore study aid that is given unconditionally. Our framework is a differential open-loop Stackelberg game between a developed country (leader) and a developing country (follower). The leader chooses the amount of mitigation aid given to the follower, which the follower either consumes or invests in costly nonpolluting capital or cheap high-emission capital. The leader gives unconditional mitigation aid only when sufficiently rich or caring sufficiently about the environmental quality, while the follower cares about environmental quality to some extent. If aid is given in steady state, it decreases the steady state level of high-emission capital and capital investments in the recipient country and the global pollution stock, but it has no effect on the levels of non-polluting capital and non-polluting investments. It accelerates the economic growth of the follower; this effect is however lower than what static growth theory predicts since most of the aid is consumed. Moreover, we find that the increase in growth takes place in the nonpolluting sector.
    Keywords: Development aid; Green growth; Conditionality; Open loop Stackelberg equilibrium
    JEL: Q56 O13
    Date: 2016–05–17

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