nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒07‒09
twelve papers chosen by
Marc Klemp
Brown University

  1. Religiosity and long-run productivity growth By Herzer, Dierk; Strulik, Holger
  2. Entertaining Malthus: Bread, Circuses and Economic Growth By Rohan Dutta; David K Levine; Nicholas W Papageorge; Lemin Wu
  3. Key Forces Behind the Decline of Fertility: Lessons from Childlessness in Rouen before the Industrial Revolution By Sandra Brée; David de la Croix
  4. Institutions vs. ‘First-Nature’ Geography – What Drives Economic Growth in Europe’s Regions? By Tobias Ketterer; Andrés Rodríguez-Pose
  5. Trust, Governance, and Growth: Exploring the Interplay By Bower, Thomas R.; Wilson, Paul N.
  6. The economic geography of human capital in Twentieth-century Latin America in an international comparative perspective By Enriqueta Camps; Stanley Engerman
  7. Short-run and Long-run Effects of Capital Taxation on Innovation and Economic Growth By Chen, Ping-ho; Chu, Angus C.; Chu, Hsun; Lai, Ching-Chong
  8. The Effect of Population Aging on Economic Growth By Maestas, Nicole; Mullen, Kathleen J.; Powell, David
  9. Economic growth and agricultural land conversion under uncertain productivity improvements in agriculture By Bruno Lanz; Simon Dietz; Tim Swanson
  10. The determinanths of industrialisation in developing countries, 1960-2005 By Guadagno, Francesca
  11. Slower Economic Growth and Subjective Well-Being in the Canadian Context: A Discussion Paper By Mike Pennock
  12. Volatility and Growth with Recursive Preferences By Barbara Annicchiarico; Alessandra Pelloni; Fabrizio Valenti

  1. By: Herzer, Dierk; Strulik, Holger
    Abstract: In this paper, we show, using a panel of developed countries, that there is a long-run negative association between church attendance and total factor productivity (TFP) with predictive causality running from declining church attendance to increasing factor productivity. According to our preferred estimate, about 18% of the increase in TFP from 1950 to 1990 is caused by declining religiosity. In order to explain this phenomenon, we integrate into standard R&D-based growth theory a micro-foundation of individual cognitive style, which is either intuitive-believing or reflective-analytical. Under the assumption that R&D productivity is positively influenced by a reflectiveanalytical cognitive style, we find that secularization leads to an increasing labor share in R&D and gradually increasing productivity growth. We use these insights to reflect on trends in religiosity and R&D-based growth in the very long run, from Enlightenment to the present day.
    Keywords: religiosity,church attendance,factor productivity,cognitive style,R&D-based growth
    JEL: N30 O11 C23
    Date: 2016
  2. By: Rohan Dutta; David K Levine; Nicholas W Papageorge; Lemin Wu
    Date: 2016–06–22
  3. By: Sandra Brée (UNIVERSITE CATHOLIQUE DE LOUVAIN, Centre de Recherche en Démographie et Sociétés); David de la Croix (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Center for Operations Research and Econometrics (CORE)
    Abstract: To better understand the forces underlying fertility decisions, we look at the forerunners of fertility decline. In Rouen, France, completed fertility dropped between 1640 and 1792 from 7.4 to 4.2 children. We review the list of possible explanations and keep only three: increase in materialism, women's empowerment and increase in returning to education. We propose a theory that shows that we can discriminate between these explanations by looking at childlessness and its social gradient. An increase in materialism or, under certain conditions, an increase in women's empowerment, leads to an increase in childlessness, while an increase in returning to education leads to a decrease in childlessness. Looking at the Rouen data, childlessness is clearly on the rise, from 4% in 1640 to 10% at the end of the 18th century, which appears to discredit the explanation based on increasing returns to education, at least for this period.
    Keywords: Demographic transition, Childlessness, Quality-quantity tradeoff, Forerunners, Women's empowerment
    JEL: J13 N33 O11
    Date: 2016–06–13
  4. By: Tobias Ketterer; Andrés Rodríguez-Pose
    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: Regional economic growth, institutions, geography, quality of government, NUTS-2 regions, Europe
    JEL: R11 O11 O43
    Date: 2016–06
  5. By: Bower, Thomas R.; Wilson, Paul N.
    Abstract: Thin trust and efficacious governance are well-established contributors to economic progress but the interplay between these factors and their joint impact on human flourishing is unclear. We extend previous analyses by expanding the cross-sectional data set to over 100 countries and by employing simultaneous models to capture the interplay between trust, governance and economic growth. We find that in this interdependent system framework that (1) the effect of trust on growth is greater than shown in earlier analyses, (2) trust and governance are complementary components that under adverse circumstances can lead to a low-growth trust trap for some societies, (3) income inequality and fractionalization play important, intermediary roles in explaining levels of trust, governance, and ultimately, economic welfare, and (4) the colonization legacy of each country captures an important component of the current variation across countries in regard to their levels of trust, governance, and economic growth.
    Keywords: Trust, Social Capital, Governance, Institutions, Economic Growth, Interdependencies, Institutional and Behavioral Economics, International Development, O15, O17, )43,
    Date: 2016
  6. By: Enriqueta Camps; Stanley Engerman
    Abstract: In this paper we present results for educational achievement in the different economic regions of Latin America (Big countries: Mexico and Brazil; Southern Cone; Andean countries; Central America; and others) during the twentieth century. The variables we use to measure education are average years of education, literacy, average years in primary school, average years in secondary school, and average years in university. To attain a broader perspective on the relationship of education with human capital and with welfare and wellbeing we relate the educational measures to life expectancy and other human capital variables and GDP per capita. We then use regressions to examine the impact of race and ethnicity on education, and of education on economic growth and levels of GDP per capita. The most significant results we wish to emphasize are related to the importance of race and racial fractionalization in explaining regional differences in educational achievement. Southern Cone countries, with a higher density of white population, present the highest levels of education in average terms, while countries from Central America and Brazil, with a higher proportion of Indigenous Americans and/or blacks, have the lowest levels. In most countries the major improvements in educational achievement are: the expansion of primary education during the first half of the twentieth century, and the expansion of secondary education after 1950. In all cases, average years in university are low, despite improvements in university quality during the last decades of the century when professors exiled during dictatorships returned to their countries of origin. International comparisons (continental averages for years of education weighted by country population size) place twentieth-century Latin America in an intermediate position between the USA and Europe at the top, and countries from Asia and Africa at the bottom.
    Keywords: LA, regional educational achievement, welfare, race and ethnicity, economic growth.
    Date: 2016–06
  7. By: Chen, Ping-ho; Chu, Angus C.; Chu, Hsun; Lai, Ching-Chong
    Abstract: In this note, we examine the effects of capital taxation on innovation and economic growth. We find that capital taxation has drastically different effects in the short run and in the long run. An increase in the capital income tax rate has both a consumption effect and a tax-shifting effect on the equilibrium growth rates of technology and output. In the long run, the tax-shifting effect dominates the consumption effect yielding an overall positive effect of capital taxation on steady-state economic growth. However, in the short run, the consumption effect becomes the dominant force causing an initial negative effect of capital taxation on the equilibrium growth rates. These contrasting effects of capital taxation at different time horizons may provide a plausible explanation for the mixed evidence in the empirical literature on capital taxation and economic growth.
    Keywords: Capital taxation; economic growth; R&D; transition dynamics
    JEL: H2 O3 O4
    Date: 2016–05
  8. By: Maestas, Nicole; Mullen, Kathleen J.; Powell, David
    Abstract: Population aging is widely expected to have detrimental effects on aggregate economic growth. However, we have little empirical evidence about the actual existence or magnitude of such effects. In this paper, we exploit differential aging patterns at the state level in the United States between 1980 and 2010. Many states have already experienced high growth rates of the 60+ population, comparable to the predicted national growth rate over the next several decades. Furthermore, these differential growth rates occur partially for reasons unrelated to economic growth, providing a natural approach to isolate the impact of aging on growth. We predict the magnitude of population aging at the state-level given the state's age structure in an initial period and exploit this predictable differential growth to estimate the impact of population aging on Gross Domestic Product (GDP) growth, and its constituent parts, labor force and productivity growth. We estimate that a 10% increase in the fraction of the population ages 60+ decreases GDP per capita by 5.7%. We find that this reduction in economic growth caused by population aging is primarily due to a decrease in growth in the supply of labor. To a lesser extent, it is also due to a reduction in productivity growth. We present evidence of downward adjustment of earnings growth to reflect the reduction in productivity.
    Keywords: population aging, GDP growth, demographic transitions
    JEL: J11 J14 J23 J26 O47
    Date: 2014–10
  9. By: Bruno Lanz; Simon Dietz; Tim Swanson
    Abstract: We study how uncertainty in the evolution of agricultural productivity interacts with economic and population growth, and the associated the demand for food. We use two-sector Schumpeterian model of growth, in which a manufacturing sector produces the traditional consumption good and an agricultural sector produces food to sustain contemporary population. Sectors differ in that agriculture also demands land as an input, itself treated as a scarce form of capital. In our model both population and sectoral technological progress are endogenously determined, and a number of key technological parameters of the model are structurally estimated using 1960-2010 data on world GDP, population, cropland and technological progress. Introducing random shocks to the evolution of total factor productivity in agriculture, we show that uncertainty optimally requires more land to be converted into agricultural use as a hedge against production shortages, and that it signficiantly affects both consumption and population trajectories.
    JEL: O11 O13 O31 J11 C61 Q16 Q24
    Date: 2016–06
  10. By: Guadagno, Francesca (UNU‐MERIT, Maastricht University, and UNCTAD)
    Abstract: Industrialisation is generally considered a synonym of economic development. This paper contributes to the literature on the engine of growth hypothesis with an empirical analysis of the determinants of industrialisation. The paper goes back to the Cornwall (1977) model of manufacturing as an engine of growth and estimates the first equation of the model, i.e. the equation of manufacturing output growth. Hausman and Taylor models are estimated for a sample of 74 countries for the period 1960-2005. The results indicate that industrialisation is faster for larger countries with an undeveloped industrial base, strong export performance, and undervalued exchange rates. Skills and knowledge accumulation played an increasingly important role since the mid-1990s. Robustness checks corroborate the validity of these findings.
    Keywords: industrialisation, manufacturing sector, technological change, industrial policy
    JEL: O10 O14 O25
    Date: 2016–05–21
  11. By: Mike Pennock
    Abstract: Most mainstream forecasts for national economies expect that mature nations such as Canada will experience a few decades of slower economic growth, relative to past rates. This was reflected in the recent long-term forecast for the Canadian economy by the Centre for the Study of Living Standards. This transition is due to underlying demographic factors which are slowing labour force growth as well as slower rates of labour force productivity. Although there is a consensus among forecasters about the inevitability of slower growth there is less consensus about the magnitude of the change. This model suggests that countries such as Canada could enter into a prolonged period of slower growth without pronounced negative consequences for population well-being if other contributors to well-being are both protected and mobilized to offset the impacts of slower income growth. The most serious threat to wellbeing that is associated with the slow-growth scenario is an expected increase in income inequality and household debt. Canada may be particularly vulnerable to these effects because it is entering a slow growth era with relatively high levels of inequality and household debt, relative to most other mature nations.
    Keywords: Economic Growth, National Income, Household Income, Economic Development, Well-Being, Prosperity, Social Progress, Canada, Income Distribution, Income Inequality, Income Growth, Household Debt, Unemployment, Government Expenditures, 2008 Recession
    JEL: I31 O10 O15 O16 N32
    Date: 2016–07
  12. By: Barbara Annicchiarico (DEF and CEIS, Università di Roma "Tor Vergata"); Alessandra Pelloni (DEF and CEIS, Università di Roma "Tor Vergata"); Fabrizio Valenti (DEF, Università di Roma "Tor Vergata")
    Abstract: This paper studies the relationship between volatility and long-run growth in a complete market economy with human capital accumulation and Epstein-Zin preferences. There is both crosscountry and time-series evidence that volatility is associated with lower growth. Matching this evidence has proved a challenge for growth models with no market failures as they tend to predict the opposite for values of risk aversion higher than unity. However in our model, risk aversion and intertemporal elasticity of substitution are allowed to move independently of each other, and when both are relatively high or relatively low, the relationship between volatility and growth is negative. Indeed this is the case for parametrizations of preferences in line with the literature.
    Keywords: Growth and Uncertainty; Epstein-Zin Preferences; Intertemporal Elasticity of Substitution; Risk Aversion
    JEL: D92 E22 E32 O49
    Date: 2016–06–24

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