nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒07‒30
thirteen papers chosen by
Marc Klemp
Brown University

  1. Landownership Concentration and the Expansion of Education By Francesco Cinnirella; Erik Hornung
  2. Religions, Fertility, and Growth in South-East Asia By Clara Delavallade; David de la Croix
  3. The Effect of the Italian Unification on the Comparative Regional Development in Literacy, 1821-1911 By Carlo Ciccarelli; Jacob Weisdorf
  4. Missing Men: World War II Casualties and Structural Change By Christoph Eder
  5. "The Falling Sperm Counts Story": A Limit to Growth? By Johanna Etner; Natacha Raffin; Thomas Seegmuller
  6. Historical education levels and present-day non-cognitive skills By Eiji Yamamura
  7. The paradox of land reform, inequality and local development in Colombia By Jean-Paul Faguet; Fábio Sanches; Marta-Juanita Villaveces
  8. Using the Salop Circle to Study Scale Effects in Schumpeterian Growth Models: Why Inter-sectoral Knowledge Diffusion Matters By Gray, Elie; Grimaud, André
  9. Liquidity, Innovation, And Endogenous Growth By Semyon MALAMUD; Francesca ZUCCHI
  10. Labor supply in the past, present, and future: a balanced-growth perspective By Per Krusell; Timo Boppart
  11. Significance of Infrastructure Investment for Economic Growth By Younis, Fizza
  12. Progressive taxation and (in)stability in an endogenous growth model with human capital accumulation By Aleksandar Vasilev
  13. IPR protection, intelligence and economic growth: a cross-country empirical investigation By Odilova, Shoirahon; Xiaomin, Gu

  1. By: Francesco Cinnirella; Erik Hornung
    Abstract: We study the relationship between the concentration of large landownership and the expansion of mass education in nineteenth-century Prussia. Cross-sectional estimates show a negative association of landownership concentration with enrollment rates. Panel estimates with county-ï¬ xed effects indicate that regions with an initially stronger concentration of large landownership exhibit increasing enrollment over time. These results are consistent with the erosion of large landowners’ feudal power due to agricultural reforms and the resulting emancipation of the peasantry which occurred throughout the nineteenth century. We present evidence consistent with the hypothesis that emancipation from labor coercion increased the private demand for education.
    Keywords: Land concentration, Education, Serfdom, Peasants' emancipation, Prussian economic history
    JEL: O43 Q15 I25 N33
    Date: 2015–05
  2. By: Clara Delavallade (IFPRI); David de la Croix (Université catholique Louvain)
    Abstract: We investigate the extent to which religions' pronatalism is detrimental to growth via the fertility/education channel. Using censuses from South-East Asia, we first estimate an empirical model of fertility and show that having a religious affiliation significantly raises fertility, especially for couples with intermediate to high education levels. We next use these estimates to identify the parameters of a structural model of fertility choice. On average, catholicism is the most pro-child religion (increasing total spending on children), followed by Buddhism, while Islam has a strong pro-birth component (redirecting spending from quality to quantity). We show that pro-child religions depress growth in the early stages of growth by lowering savings, physical capital, and labor supply. These effects account for 10\% to 30\% of the actual growth gaps between countries over 1950-1980. At later stages of growth, pro-birth religions lower human capital accumulation, explaining between 10\% to 20\% of the growth gap between Muslim and Buddhist countries over 1980-2010.
    Date: 2016
  3. By: Carlo Ciccarelli (DEF & CEIS,University of Rome Tor Vergata); Jacob Weisdorf (University of Southern Denmark, CEPR, and CAGE)
    Abstract: This paper provides the first ever diachronic homogenous estimates of literacy rates in the Italian provinces during the period 1821-1911, by gender. The estimates exploit the age structure information reported in the population censuses of 1881 and 1911 to back cast literacy rates to the early 19th century. Territorial differences were already huge in the aftermath of the Napoleonic wars, with Southern regions registering extremely low levels and essentially no change before the unification of 1861. Furthermore, the early rise of literacy rates for Northern women suggests a dimension of the North-South gap that significantly the political unification of the country.
    Keywords: Human capital, literacy, regional economics, Italy
    JEL: J24 R11 N13
    Date: 2016–07–25
  4. By: Christoph Eder
    Abstract: A shock to the sector composition of the local labor market can affect long-run economic development of a location. Because structural change ultimately shifts labor from agriculture to services, an early transition to manufacturing may hamper long-run prosperity. The identification strategy exploits military World War II (WWII) casualties in Austrian municipalities as an exogenous shock to the local labor market. WWII casualties shifted labor out of agriculture into manufacturing in the short-run, which eventually led to a differential path of structural change. In the long-run, I find a strong and robust negative effect of WWII casualties on subsequent economic output.
    Keywords: structural change, local labor markets, spatial equilibrium, World War II, Austria
    JEL: O14 J40 N14 R11 R12
    Date: 2016–07
  5. By: Johanna Etner (University Paris Ouest Nanterre la Défense, EconomiX and Climate Economics Chair); Natacha Raffin (University Paris Ouest Nanterre la Défense, EconomiX and Climate Economics Chair); Thomas Seegmuller (Aix-Marseille University (Aix-Marseille School of Economics)-CNRS-EHESS)
    Abstract: We develop an overlapping generations model of growth, in which agents differ through their ability to procreate. Based on epidemiological evidence, we assume that pollution is a cause of this health heterogeneity, affecting sperm quality. Nevertheless, agents with impaired fertility may incur health treatments in order to increase their chances of parenthood. In this set-up, we analyse the dynamic behaviour of the economy and characterise the situation reached in the long run. Then, we determine the optimal solution that prevails when a social planner maximises a Millian utilitarian criterion and propose a set of available economic instruments to decentralise the optimal solution. We underscore that to correct for both the externalities of pollution and the induced-health inefficiency, it is necessary to tax physical capital while it requires to overall subsidy mostly harmed agents within the economy. Hence, we argue that fighting against the sources of an altered reproductive health is more relevant than directly inciting agents to incur health treatments.
    Keywords: Pollution; Growth; Fertility; Health.
    JEL: O44 Q56 I18
    Date: 2016–07–04
  6. By: Eiji Yamamura
    Abstract: I examined the extent to which education levels in the 19th century have shaped current norms, which influence individuals’ present-day non-cognitive skills and perceptions of life. Cross-country, individual-level data were compared with each country’s average years of schooling in 1870. After controlling for various country-level and individual characteristics, the key findings were as follows: (1) people in countries with high historical education levels place importance on hard work, ambition, and education; (2) people in countries with high historical education levels tend to show perseverance and have a sense of responsibility.
    Keywords: Historical education level, norms, non-cognitive skills.
    JEL: I25 D83 Z13 N30
    Date: 2016–01–13
  7. By: Jean-Paul Faguet; Fábio Sanches; Marta-Juanita Villaveces
    Abstract: Over two centuries, Colombia transferred vast quantities of land, equivalent to the entire UK landmass, mainly to landless and poor peasants. And yet Colombia retains one of the highest concentrations of land ownership in the world. Why? We show that the effects of land reform on inequality and economic and human development were heterogeneous. On average, rural properties grew larger, land inequality and dispersion fell, and development increased across Colombia’s 1100+ municipalities between 1961-2010. But pre-existing inequality counteracts these effects, resulting in smaller rural properties, greater dispersion, and lower levels of development. How? Land reform increased public investment in agriculture, raising consumption of public and private goods. But land concentration again counters these effects. Elites seem to have distorted local decision-making to benefit themselves. We conclude that land reform’s second-order effects, on the distribution of local power, are more important than its first-order effects on the distribution of land.
    Keywords: land reform; inequality; development; latifundia; poverty; Colombia
    JEL: H27 N16 Q15
    Date: 2016–07
  8. By: Gray, Elie; Grimaud, André
    Abstract: This paper analyzes the link between the fact that fully endogenous growth models exhibit (or not) the non-desirable scale effects property and assumptions regarding the intensity of knowledge diffusion. In that respect, we extend a standard Schumpeterian growth model by introducing explicitly knowledge diffusion over a Salop (1979) circle: a continuum of sectors simultaneously sending and receiving knowledge is located over the circle. The link between knowledge diffusion and scale effects stems from the fact that the more diffusion spreads with the size of the economy, the larger the pools of knowledge used by each sector’s R&D activity are, the higher the marginal productivity of labor in R&D is, and eventually the higher the growth rate is. The paper tackles the apparent following paradox. Knowledge diffusion seems to lead to scale effects; however, the former is empirically desirable while the latter is not. Our first basic result is that a sufficient condition to have a scale-invariant fully endogenous growth model is to assume no inter-sectoral knowledge diffusion. However, this assumption is not empirically reasonable. We overcome the aforementioned paradox by showing that the absence of diffusion is not a necessary condition to suppress scale effects. More precisely, we determine sets of reasonable assumptions on knowledge diffusion under which one can obtain fully endogenous growth models complying with most undeniable empirical facts - namely the absence of significant scale effects, the impact of public policies on the growth rate, and somehow realistic interactions among sectors R&D activities (including the occurrence of GPTs).
    Keywords: Schumpeterian growth theory / Scale effects / Inter-sectoral knowledge diffusion / Knowledge spillovers / Non rivalry
    JEL: O30 O31 O33 O40 O41
    Date: 2016–07
  9. By: Semyon MALAMUD (Ecole Polytechnique Federale de Lausanne and Swiss Finance Institute); Francesca ZUCCHI (Ecole Polytechnique Federale de Lausanne and Swiss Finance Institute)
    Abstract: We study optimal liquidity management, innovation, and production decisions for a continuum of firms facing financing frictions and the threat of creative destruction. We show that liquidity constraints unambiguously lead firms to decrease their production rate but, surprisingly, may spur investment in innovation (R&D). Using the model, we characterize which firms substitute production for innovation when constrained and thus display a non-monotonic relation between cash reserves and R&D. We embed our single-firm dynamics in a Schumpeterian model of endogenous growth and demonstrate that financing frictions have an ambiguous effect on economic growth.
    Keywords: Innovation, Cash management, Financial constraints, Endogenous growth, Creative destruction
    JEL: D21 G31 G32 G35 L11
  10. By: Per Krusell (Stockholm University); Timo Boppart (IIES, Stockholm University)
    Abstract: We argue that a stable utility function of consumption and hours worked for which income effects are slightly stronger than substitution effects can rationalize the long-run data for the main macroeconomic quantities. In these long-run data, in the U.S. as well as in other countries, as productivity grows at a steady rate, hours worked fall slowly and at an approximately constant rate. We narrow down the set of preferences consistent with balanced growth under constant (negative) hours growth. The resulting class amounts to a slight enlargement of the well-known “balanced-growth preferences†that dominate the macro literature and are based on requiring constant hours worked. Thus, hours falling at a constant rate is not inconsistent with the remaining balanced-growth facts but merely requires a slight broadening of the preference class considered. The broadening of the preference class introduces some well-known cases not previously thought to be consistent with balanced growth. From our perspective, we interpret the recent decades of stationary hours worked in the U.S. as a temporary departure from a long-run pattern, and to the extent productivity will keep growing, we predict that hours will fall further.
    Date: 2016
  11. By: Younis, Fizza
    Abstract: The study attempts to examine the impact of infrastructure investment on economic growth in Pakistan. For this purpose, social and economic infrastructure indices are constructed using Principle Component Analysis and VECM is applied to estimate the long-run as well as short-run relationship between the variables. The study follows the theoretical background of Barro’s (1990) model of government expenditure. The theory suggests that infrastructure investment can have negative impact on economic growth if marginal product of such investment falls below price of capital. The results show that long-run impact of private investment and social infrastructure investment on economic growth is positive and significant while economic infrastructure investment affects economic growth negatively. In short-run, on the other hand, infrastructure investment does not have any significant impact on economic growth. But national savings rate and private investment rate show negative impact on growth. Whereas, price of capital and direct tax have positive impact on economic growth. Diagonastic tests are also performed to test validity of the model. The results have important policy implications as the study reveals inefficiency of infrastructure investment in Pakistan. There is need to divert resources from economic infrastructure to social infrastructure which has the potential to increase growth rate.
    Keywords: Economic growth; Infrastructure investment; Economic and social infrastructure; Empirical analysis; Vector error correction model
    JEL: C5 O4 O53
    Date: 2014–01–01
  12. By: Aleksandar Vasilev
    Abstract: We show that in an endogenous growth model with human accumulation calibrated to Bulgarian data under the progressive taxation regime (1993-2007), the artificial economy exhibits equilibrium indeterminacy. These results are in line with the recent findings in Chen and Guo (2015) in the context of an AK endogenous growth model. Also, the findings are in contrast to Guo and Lansing (1988) who argue that progressive taxation works as an automatic stabilizer. Progressive taxation in our setup leads to equilibrium indeterminacy. This indeterminacy result could explain, at least partially, why the economic performance under the progressive taxation regime in Bulgaria was not impressive.
    Keywords: Progressive Income Taxation; Endogenous growth; Human capital; Equilibrium (In)determinacy.
    JEL: E32 E62 O41
    Date: 2016–07–18
  13. By: Odilova, Shoirahon; Xiaomin, Gu
    Abstract: Extant literature on the link between patent protection and economic growth have yielded inconclusive results. In this study, we aim to engage in this debate by conjecturing that intelligence moderates the effect of patent protection on economic growth. Using annual data of 88 nations from 1970 to 2013 we find that patent protection has positive effect on growth only after accounting for the interaction between IQ and IPR. Indeed, we find that the interaction term is negative and statistically significant suggesting that countries with higher level of intelligence (above 90 points) can offset the negative effect of weak IPR protection. The results remain robust for a battery of robustness tests.
    Keywords: IQ; intelligence; patent protection; economic growth
    JEL: F0
    Date: 2016

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