nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒07‒23
four papers chosen by
Marc Klemp
Brown University

  1. Advertising, Innovation and Economic Growth By Pau Roldan; Laurent Cavenaile
  2. Economic growth and complementarity between stages of human capital* By Ferreira, Pedro Cavalcanti; Delalibera, Bruno Ricardo
  3. The Causal Impact of Human Capital on R&D and Productivity: Evidence from the United States By Veronica Mies; Matias Tapia; Ignacio Loeser
  4. Endogenous Sector-Biased Technological Change and Industrial Policy By Berthold Herrendorf

  1. By: Pau Roldan (New York University); Laurent Cavenaile (New York University)
    Abstract: We develop a model of firm dynamics through product innovation that explicitly incorporates advertising decisions by firms. We model advertising by constructing a framework that unifies a number of facts identified by the empirical marketing literature. The model is then used to explain several empirical regularities across firm sizes using U.S. data. Through a novel interaction between R&D and advertising, we are able to explain empirically observed deviations from Gibrat’s law, as well as the behavior of advertising expenditures across firms, the degree of substitution between R&D and advertising expenditures as firms grow large, and broadly the effects of advertising on both firm and economic growth. We find that smaller firms can be both more innovation- and advertising-intensive as in the data even when there exist increasing returns to scale in research.
    Date: 2016
  2. By: Ferreira, Pedro Cavalcanti; Delalibera, Bruno Ricardo
    Abstract: We study the impact of the different stages of human capital accumulation on the evolution of labor productivity in a model calibrated to the U.S. from 1961 to 2008. We add early childhood education to a standard continuous time life cycle economy and assume complementarity between educational stages. There are three sectors in the model: the goods sector, the early childhood sector and the formal education sector. Agents are homogenous and choose the intensity of preschool education, how long to stay in formal school, labor effort and consumption, and there are exogenous distortions to these four decisions. The model matches the data very well and closely reproduces the paths of schooling, hours worked, relative prices and GDP. We find that the reduction in distortions to early education in the period was large and made a very strong contribution to human capital accumulation. However, due to general equilibrium effects of labor market taxation, marginal modification in the incentives for early education in 2008 had a smaller impact than those for formal education. This is because the former do not decisively affect the decision to join the labor market, while the latter do. Without labor taxation, incentives for preschool are significantly stronger.
    Date: 2016–06–29
  3. By: Veronica Mies (Pontificia Universidad Catolica de Chile); Matias Tapia (Pontificia Universidad Catolica de Chile); Ignacio Loeser (Pontificia Universidad Catolica de Chile)
    Abstract: We use census micro data aggregated at the state level data for US cohorts born between 1915 and 1939 to test the impact of secondary and tertiary schooling in the US at the state-cohort level on R&D and TFP growth across industries in 1970. We instrument our measures of schooling by using the variation in compulsory schooling laws and differences in mobilization rates in WWII, which we relate to the education benefits provided by the GI Bill Act (1944). This novel instrument provides a clean source of variation in the costs of attending college. Two-stage least squared regressions find no effect of the share of population with secondary schooling on outcomes such as n R\&D per worker or TFP growth. On the other hand, the share of population with tertiary education has a significant effect on both R&D per worker or TFP growth.
    Date: 2016
  4. By: Berthold Herrendorf (Arizona State University)
    Abstract: We build a model of structural transformation with endogenous sector-biased technological change. We show that if the return to specialization is larger in the goods sector than in the service sector, then the equilibrium has the following properties: aggregate growth is balanced; the service sector receives more innovation but the goods sector experiences more productivity growth; structural transformation takes place from goods to services. Compared to the efficient allocation the laissez-faire equilibrium has too much labor in the goods sector, implying that optimal industrial policy should aim to increase, not decrease, the pace of structural transformation.
    Date: 2016

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