nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒10‒30
thirteen papers chosen by
Marc Klemp
Brown University

  1. Distance to the Pre-industrial Technological Frontier and Economic Development By Özak, Ömer
  2. Adherence to Cultural Norms and Economic Incentives: Evidence from Fertility Timing Decisions By Chabé-Ferret, Bastien
  3. Oil price and economic growth: a long story? By María Dolores Gadea; Ana Gómez-Loscos; Antonio Montañés
  4. Path Dependence and Interdependence Between Institutions and Development By David Fadiran; Mare Sarr
  5. Endogenous Growth in Production Networks By Stanislao Gualdi; Antoine Mandel
  6. Determinants of Property Rights Protection in Sub-Saharan Africa By Simplice Asongu; Oasis Kodila-Tedika
  7. The Big Push and Economic Growth: Empirical Evidence By Juan David García
  8. Weak Scale Effects in Overlapping Generations Economy By Bharat Diwakar; Gilad Sorek
  9. Institutions, Knowledge Accumulation and Productivity Growth in the Second Half of the XXth By Sanchís-Llopis, Juan A.; Sanchís Llopis, M. Teresa; Esteve, Vicente; Cubel Montesinos, Antonio
  10. Brain gain in the age of mass migration By Francesco Giffoni; Matteo Gomellini
  11. Economic and Demographic Interactions in Post- World War France: A Gendered Approach. By Magali Jaoul-Grammare; Faustine Perrin
  12. Economic Growth, Financial Development, Urbanization and Electricity Consumption Nexus in UAE By SBIA, Rashid; Shahbaz, Muhammad; Ozturk, Ilhan
  13. Dynamics of Human Capital Accumulation, IPR Policy, and Growth By Bharat Diwakar; Gilad Sorek

  1. By: Özak, Ömer
    Abstract: This research explores the effects of the geographical distance to the pre-industrial technological frontier on economic development. It establishes theoretically and empirically that there exists a persistent non-monotonic effect of distance to the frontier on development. In particular, exploiting a novel measure of the travel time to the technological frontier and variations in its location during the pre-industrial era, it establishes a robust persistent U-shaped relation between the distance to the pre-industrial technological frontier and economic development. Moreover, it demonstrates that isolation from the frontier has had a positive cumulative effect on innovation and entrepreneurial activity levels, suggesting isolation may have fostered the emergence of a culture conducive to innovation, knowledge creation, and entrepreneurship.
    Keywords: E02, F15, F43, N10, N70, O11, O14, O31, O33, Z10
    JEL: E02 F15 F43 N10 O10 O11 O14 O25 O31 O33 Z10
    Date: 2016–10
  2. By: Chabé-Ferret, Bastien (Université catholique de Louvain)
    Abstract: I analyze the interplay between culture and economic incentives in decision-making. To this end, I study birth timing decisions of second generation migrant women to France and the US. Only the probability to have three or more children increases with the home country fertility norm, whereas the timing of the first two births is either unaffected or negatively correlated. I propose a model that rationalizes these findings in which decisions are the result of a trade-off between an economic cost-benefit analysis and a cultural norm. The model predicts that decisions with a higher cost of deviation from the economic optimum should be less prone to cultural influence. This is consistent with substantial evidence showing that the timing of the first birth bears much larger costs for mothers in terms of labor market outcomes than that of subsequent births.
    Keywords: cultural norms, fertility, birth timing
    JEL: J13 J15 Z10 Z12
    Date: 2016–10
  3. By: María Dolores Gadea (UNIVERSITY OF ZARAGOZA); Ana Gómez-Loscos (Banco de España); Antonio Montañés (UNIVERSITY OF ZARAGOZA)
    Abstract: This study investigates changes in the relationship between oil prices and the US economy from a long-term perspective. Although neither of the two series (oil price and GDP growth rates) presents structural breaks in mean, we identify different volatility periods in both of them, separately. From a multivariate perspective, we do not observe a significant effect between changes in oil prices and GDP growth when considering the full period. However, we find a significant relationship in some subperiods by carrying out a rolling analysis and by investigating the presence of structural breaks in the multivariate framework. Finally, we obtain evidence, by means of a time-varying VAR, that the impact of the oil price shock on GDP growth has declined over time. We also observe that the negative effect is greater at the time of large oil price increases, supporting previous evidence of nonlinearity in the relationship.
    Keywords: oil price, business cycle, structural breaks
    JEL: C22 C32 E32 Q43
    Date: 2016–10
  4. By: David Fadiran; Mare Sarr
    Abstract: Path dependence theory, within the institutions context, means that the path of institutions promulgated within a system historically determines the nature of institutions that will ensue within the same system in the present and in the future. The paper makes use of a newly constructed index of institutions quality, and addresses three related questions; the existence of path dependence in institutions, the interdependence and causality between political and economic institutions, and lastly the interdependence between economic development and institutions. In addressing the first question, I use unit root tests to test the hypothesis that institutions promulgated during colonial times still influence institutions promulgated during the post colonial era. I also test for interdependence between institutions in Nigeria using an error correction model in analysing the extent of interdependence between political and economic institutions. Lastly, I test the critical juncture hypothesis—which argues that better institutions lead to economic development and the modernisation hypotheses—which argues that economic development leads to better institutions. The results show support for early path dependence in both political and economic institutions. I also find evidence in support of interdependence running from economic to political institutions. Lastly, there is evidence of a long-run association between institutions and economic development, with the evidence supporting the critical juncture hypothesis, more than the modernisation hypothesis.
    Keywords: institutions, Legislations, Persistence, Economic Growth and Development, Nigeria
    JEL: K00 K11 N00 N1 N47 O1 O11
    Date: 2016–10
  5. By: Stanislao Gualdi (CentraleSupélec); Antoine Mandel (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We investigate the interplay between technological change and macroeconomic dynamics in an agent-based model of the formation of production networks. On the one hand, production networks form the structure that determines economic dynamics in the short run. On the other hand, their evolution reflects the long-term impacts of competition and innovation on the economy. We account for process innovation via increasing variety in the input mix and hence increasing connectivity in the network. In turn, product innovation induces a direct growth of the firm's productivity and the potential destruction of links. The interplay between both processes generate complex technological dynamics in which phases of process and product innovation successively dominate. The model reproduces a wealth of stylized facts about industrial dynamics and technological progress, in particular the persistence of heterogeneity among firms and Wright's law for the growth of productivity within a technological paradigm. We illustrate the potential of the model for the analysis of industrial policy via a preliminary set of policy experiments in which we investigate the impact on innovators' success of feed-in tariffs and of priority market access.
    Keywords: Production network,Network formation,Scale-free networks,Firms demographics,distribution of firms' size,Zipf law,general equilibrium,monopolistic competition,disequilibrium
    Date: 2016–04
  6. By: Simplice Asongu (Yaoundé/Cameroun); Oasis Kodila-Tedika (University of Kinshasa)
    Abstract: This article complements existing literature by assessing determinants of property rights protection with particular emphasis on history, geography and institutions in Sub-Saharan Africa. The empirical evidence is based on a sample of 47 countries for the period 2000-2007. Random effects GLS regressions are employed using property rights measurements from the Mo Ibrahim and Heritage foundations. The results broadly show that ethnic fractionalisation, Polity IV and GDP per capita have positive effects on property rights institutions while the following have negative effects: military rule, the Protestant religion, maturity from colonial independence and population density. The findings have relevant policy implications for countries in the sub-region currently on the path to knowledge-based economies.
    Keywords: Property rights protection; Panel data; Africa
    JEL: F42 K42 O34 O38 O57
    Date: 2016–03
  7. By: Juan David García
    Abstract: Since the introduction in the 1940s of the "big push" as a concept and a conceptual frame, it has served to explain the divergent processes of economic growth and development of different countries. This article attempts to link the advance in the theory of the big push made by (Murphy, Shleifer and Vishny, 1988), with other studies that empirically confirm this development. The results show that the mathematical development made by (Murphy et al., 1988) can be supported empirically, which means that in fact the actual inter-sectoral dependence, under certain conditions, helps to build virtuous circles contributing to economic growth and development.
    Keywords: Big Push, empirical evidence, economic growth, economic development
    JEL: O40 E10 N10
    Date: 2016–10–20
  8. By: Bharat Diwakar; Gilad Sorek
    Abstract: We show how the two alternative saving motives, life-cycle consumption smoothing and parental bequests, determine the relation between population growth and R&D-based economic growth, i.e. the sign of the weak scale effect. We take a textbook R&D-based growth model of infinitely living agents with no life-cycle saving motive and re-analyze it in the Overlapping Generations (OLG) framework, which incorporates both life-cycle and bequest saving motives. We decompose the effect of each saving motive on the sign of the weak scale effect, and show that in the presence of both saving motives it is ambiguous in general, and may also be non-monotonic. Hence, this study contributes to the recent line of research aimed to align modern growth theory with the empirical evidence on the relation between population growth and economic prosperity.
    Keywords: R&D-based Growth, Weak Scale-Effect, Bequests, OLG
    JEL: O31 O40
    Date: 2016–10
  9. By: Sanchís-Llopis, Juan A.; Sanchís Llopis, M. Teresa; Esteve, Vicente; Cubel Montesinos, Antonio
    Abstract: This paper studies the relevance of institutional differences in the way knowledge determines productivity for a set of 21 OECD countries in the second half of the XXth century. The relationship between TFP and knowledge related variables is reconsidered after controlling for a new set of institutional variables tailored to represent the post WWII institutions: the Welfare State and international trade and capital flows liberalization. We estimate the impact of innovation variables over productivity during the Golden Age as compared to the whole period 1953-2007, after controlling by these specific institutional variables. Additionally, we distinguish the particular impact of these relationships for five groups of countries following Amable (2006) classification of different kinds of capitalism. Our results suggest institutions determine the response of TFP to the knowledge variables and that the resulting elasticities are higher during the Golden Age. We find that there are not significant differences between the different groups and the market oriented economies with regard to the elasticity of TFP to the indoor innovation, with the exception of Japan. However, the results suggest that in Anglo-Saxon market oriented economies, international spillovers of technology have a higher impact on TFP. Additionally, in continental and Mediterranean European countries and Japan, TFP is more sensitive to human capital accumulation than in the market-oriented economies (the US and the UK).
    Keywords: spillovers; domestic knowledge; institutions; TFP
    JEL: O43 O40 O31
    Date: 2016–10
  10. By: Francesco Giffoni (University of Rome, La Sapienza); Matteo Gomellini (Bank of Italy)
    Abstract: The relationship between emigration and human capital is a hotly debated issue. Nowadays discussions focus mainly on the so called brain drain, i.e. the reduction in the human capital endowment of a country due to the emigration of more skilled people. Differently, this paper investigates whether and how the Italian emigration of the early twentieth century induced a domestic increase in school attendance rates. Many historical clues suggest that this actually happened in Italy at the turn of the nineteenth century. At least three rationales lie at the heart of such a relationship: first, emigration or its prospects increase the expected return to schooling thus making education more attractive; second, return migration could fuel a rise in school attendance via monetary and non-monetary channels; third, remittances could help in relaxing the budget constraint that prevented people to invest in education. Using a new dataset at the city level and different econometric techniques, we find quantitative support that primary school attendance rates have been positively correlated with (and, arguably, partially caused by) emigration and return migration. We also find that remittances had a positive effect on schooling.
    Keywords: migration, brain gain, schooling
    JEL: F22 N33 O15
    Date: 2015–04
  11. By: Magali Jaoul-Grammare; Faustine Perrin
    Abstract: This paper investigates the interaction between economic, demographic and educational variables in post- World War II France. Based on the assumptions of the unified growth theory, we estimate a vector autoregression for data on fertility, GDP per capita, educational attainment, labor force participation and wages over the period 1962-2008. The methodology employed is based on VAR modeling, using a nonstructural approaches. Our findings are consistent with the statements of the theoretical literature and emphasize the importance of the role played by gender roles on demographic and economic developments. In particular, the analysis shows that relative wages endogenously adjust to the level of female education and fertility. The investigation of the effect of shocks through the analysis of impulse responses confirms these results.
    Keywords: Causality; Vector Auto-regression; Gender; Economic Growth; France.
    JEL: C32 J16 N34
    Date: 2016
  12. By: SBIA, Rashid; Shahbaz, Muhammad; Ozturk, Ilhan
    Abstract: This study aims to explore the relationship between economic growth, urbanization, financial development and electricity consumption in United Arab Emirates for 1975-2011 period. ARDL bounds testing approach is employed to examine long run relationship between the variables in the presence of structural breaks. The VECM Granger causality is applied to investigate the direction of causal relationship between the variables. Our empirical exercise validated the cointegration between the series in case of United Arab Emirates. Further, results reveal that inverted U-shaped relationship is found between economic growth and electricity consumption. Financial development adds in electricity consumption. The relationship between urbanization and electricity consumption is also inverted U-shaped. This implies that urbanization increases electricity consumption initially and after a threshold level of urbanization, electricity demand falls. The causality analysis finds feedback hypothesis between economic growth and electricity consumption i.e. economic growth and electricity consumption are interdependent. The bidirectional causality is found between financial development and electricity consumption. Economic growth and urbanization Granger cause each other. The feedback hypothesis is also found between urbanization and financial development, financial development and economic growth and same is true for electricity consumption and urbanization.
    Keywords: Economic growth, urbanization, electricity consumption, financial development
    JEL: C5
    Date: 2016–10–10
  13. By: Bharat Diwakar; Gilad Sorek
    Abstract: We study the effect of IPR (Intellectual Property Rights) policy on growth, in a closed overlapping-generations economy, which undergoes transitional development phase of human capital accumulation. We show that the growth-maximizing policy is stage-dependent: in the early development phase, during which innovation cost is high relative to worker productivity, weak IPR protection can expedite economic growth and may be necessary to escape long run stagnation. Weaker IPR protection erodes monopolistic deadweight loss and, thereby, increases aggregate output and saving. However, it also shifts investment away from R&D activity towards the formation of physical capital. We show that the former (positive) effect is dominant during the early development phase. However, as human capital is further accumulated, and labor productivity correspondingly increases, economic growth is maximized with stronger IPR protection.
    Keywords: Stage-Dependent IPR, OLG, Human Capital, Development and Growth
    JEL: O31 O34
    Date: 2016–10

This nep-gro issue is ©2016 by Marc Klemp. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.