nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒06‒25
ten papers chosen by
Marc Klemp
Brown University

  1. Directed Technical Change and Economic Growth Effects of Environmental Policy By Peter K. Kruse-Andersen
  2. Does one size fit all? The impact of cognitive skills on economic growth. By Nadir Altinok; Abdurrahman Aydemir
  3. Regional human capital inequality in Europe in the long run, 1850 – 2010 By Claude Diebolt; Ralph Hippe
  4. Institutional differences across resource-based economies By Utku Teksoz; Katerina Kalcheva
  5. Institutions vs. "First-Nature" Geography - What Drives Economic Growth in Europe's Regions? By Ketterer, Tobias; Rodríguez-Pose, Andrés
  6. Puncturing the Malthus delusion: structural change in the British economy before the industrial revolution, 1500-1800 By Patrick Wallis; Justin Colson; David Chilosi
  7. Remoteness equals backwardness? Human capital and market access in the European regions: insights from the long run. By Claude Diebolt; Ralph Hippe
  8. Aging, Pensions, and Growth By Tetsuo Ono
  9. Trade, firm selection, and innovation: the competition channel By Giammario Impullitti; Omar Licandro
  10. War and peace: why is political stability pivotal for economic growth of OIC countries? By Uddin, Md Akther; Masih, Mansur

  1. By: Peter K. Kruse-Andersen (Department of Economics, University of Copenhagen)
    Abstract: A Schumpeterian growth model is developed to investigate how environmental policy affects economic growth when environmental policy also affects the direction of technical change. In contrast to previous models, production and pollution abatement technologies are embodied in separate intermediate good types. A set of stylized facts related to pollution emission, environmental policy, and pollution abatement expenditures is presented, and it is shown that the developed model is consistent with these stylized facts. It is shown analytically that a tightening of the environmental policy unambiguously directs research efforts toward pollution abatement technologies and away from production technologies. This directed technical change reduces economic growth and pollution emission growth. Simulation results indicate that even large environmental policy reforms have small economic growth effects. However, these economic growth effects have relatively large welfare effects which suggest that static models and exogenus growth models leave out an important welfare effect of environmental policy.
    Keywords: Directed technical change, endogenous growth, pollution, environmental policy, Schumpeterian growth model
    JEL: O30 O41 O44 Q55 Q58
    Date: 2016–06–14
  2. By: Nadir Altinok; Abdurrahman Aydemir
    Abstract: Our paper reassesses the question of the impact of cognitive skills on economic growth using new indicators for cognitive skills. These data extend measures of cognitive skills substantively. In particular, our data extends the coverage of less developed countries, among them adding 27 countries of Sub- Saharan Africa, a continent that was largely missing from the analysis of the effects of learning outcomes on economic growth. Using this extended dataset and employing several identification strategies, cognitive skills are found to have a positive impact on economic growth. We address the heterogeneity in the causal effect of cognitive skills on growth and show that the effect of skills on growth differs across regions and by the economic level of countries. Our results indicate that high-income countries should focus on increasing the number of high skilled pupils, while countries from Sub-Saharan Africa would benefit more by investing in the development of basic skills.
    Keywords: Education Quality, Cognitive Skills, PISA, Human Capital, Growth, Development.
    JEL: H5 I2 O4
    Date: 2016
  3. By: Claude Diebolt (BETA, University of Strasbourg Strasbourg, France); Ralph Hippe (London School of Economics and Political Science, Grantham Research Institute on Climate Change and the Environment)
    Date: 2016
  4. By: Utku Teksoz; Katerina Kalcheva
    Abstract: To predict economic success and failure, academics and policymakers alike are interested in the differences in institutional structures across natural resource-based economies. This paper uses a political economy framework to examine the effect of institutional variables on per capita Gross-Domestic-Product in resource-rich economies. After controlling for institutions, natural resource rents cease to have a negative impact on long-term growth. Institutions in resource-based economies foster economic growth when voice and accountability are in place; broad-based rule of law is enforced with secure property rights, and control of corruption; and when government effectiveness, regulatory quality, and political stability are positively perceived.
    Keywords: institutions, growth, political power, rents, property rights, resource-based economies
    Date: 2016
  5. By: Ketterer, Tobias; Rodríguez-Pose, Andrés
    Abstract: The debate on whether institutions or geography prevail in driving economic growth has been rife (e.g. Sachs 2003 vs. Rodrik et al. 2004). Most of the empirical analyses delving into this debate have focused on world countries, whose geographical and institutional conditions differ widely. Subnational analyses considering groups of countries with, in principle, more similar institutional and geographical conditions have been limited and tended to highlight that geography is more important than institutions at subnational level. This paper aims to address whether this is the case by investigating how differences in institutional and "first-nature" geographical conditions have affected economic growth in Europe's regions in the period 1995-2009. In the analysis we use a newly developed dataset including regional quality of government indicators and geographical charactersitics and employ 2-SLS and IV-GMM estimation techniques with a number of regional historical variables as instruments. Our results indicate that at a regional level in Europe institutions rule. Regional institutional conditions - and, particularly, government effectiveness and the fight against corruption - play an important role in shaping regional economic growth prospects. This does not imply, however, that geography is irrelevant. There is evidence of geographical factors affecting regional growth, although their impact is dwarfed by the overriding influence of institutions.
    Keywords: Europe; Geography; institutions; NUTS-2 regions; quality of government; Regional economic growth
    JEL: O11 O43 R11
    Date: 2016–06
  6. By: Patrick Wallis; Justin Colson; David Chilosi
    Abstract: Accounts of structural change in the pre-modern British economy vary substantially. We present the first time series of male labour sectoral shares before 1800, using a large sample of probate and apprenticeship data to produce national and county-level estimates. England experienced a rapid decline in the agricultural share between the early seventeenth and the beginning of the eighteenth centuries, associated with rising agricultural and especially industrial productivity; Wales saw only limited changes. Our results provide further evidence of early structural change, highlighting the significance of the mid-seventeenth century as a turning point in English economic development.
    Keywords: Labour force; sectoral distribution; labour productivity; Britain; Wales
    JEL: N0
    Date: 2016–06
  7. By: Claude Diebolt; Ralph Hippe
    Abstract: In a recent contribution, Redding and Schott (2003) add human capital to a two sector NEG model, highlighting that remoteness represents a penalty that gives disincentives to invest in human capital. But is this hypothesis consistent with long-term evidence? We test the persistence of this effect at the regional level in an historical setting. The results show that market access has a significant positive influence on human capital in OLS, Tobit and IV regression models. Thus, the paper confirms the ‘penalty of remoteness’ hypothesis for Europe in the long run.
    Keywords: Human Capital, New Economic Geography, Regional Development, Market Access.
    JEL: I21 N33 N93 R11
    Date: 2016
  8. By: Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This study presents an endogenous growth, overlapping-generations model fea- turing probabilistic voting over public pensions. The analysis shows that (i) the pension-GDP ratio increases as life expectancy increases in the presence of an an- nuity market, while it may show a hump-shaped pattern in its absence; (ii) the growth rate is higher in the presence of the annuity market than its absence, but the presence implies an intergenerational trade-off in terms of utility.
    Keywords: Economic Growth; Population Aging; Probabilistic Voting; Public Pension; Annuity Market
    JEL: D70 E24 H55
    Date: 2014–04
  9. By: Giammario Impullitti; Omar Licandro
    Abstract: We study the welfare gains originating from pro-competitive effects of trade liberalization in an economy with heterogeneous firms, variable markups and endogenous growth. Variable markups arise from oligopoly trade in similar goods, and cost-reducing innovation is the engine of sustained productivity growth. Trade liberalization stiffens product market competition by reducing markups, generating tougher firm selection and increasing the aggregate productivity level. Market share reallocations triggered by selection increase firms’ incentives to innovate, thereby leading to a higher aggregate productivity growth rate. Endogenous productivity growth boosts the selection gains from trade, leading to substantial welfare improvements. A calibrated version of the model shows that growth doubles the gains from trade obtainable in models with static firm-level productivity.
    Keywords: Endogenous Growth, Heterogeneous Firms, Oligopoly, Variable Markups, Dynamic Gains from Trade.
    Date: 2016
  10. By: Uddin, Md Akther; Masih, Mansur
    Abstract: Since the end of World War II, Muslim countries have been plagued by sixteen major wars, many coups, political, religious and ethnic insurgency, and revolutions. While many developing countries in southeast Asia have emerged as developed economy in this time period, in spite of having sufficient natural resources, most of the Muslim countries are still fighting with higher inflation, unemployment, poverty, inequality, poor healthcare, illiteracy, and rampant corruption. This paper studies how political stability affects growth in OIC countries by using relatively advanced dynamic GMM and simultaneous quantile regression. It is found that political stability has significant positive effect on growth. The impact of political stability on economic growth is more important for lower income countries than higher income countries. Most of the low to mid income oil dependent OIC countries suffer from chronic misery, higher inflation and persistent unemployment, which has significant negative effect on growth. Oil revenue plays a major role in economic growth for both OIC and Non-OIC oil dependent developing countries. The importance of political stability, economic diversification and macroeconomic stability has been restated with policy recommendations for oil dependent developing countries in general and OIC countries in particular.
    Keywords: political stability, economic growth, misery index, oil rent, OIC countries, dynamic GMM, Quantile regression 1Md
    JEL: C58 O11
    Date: 2016–05–31

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