nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒01‒01
ten papers chosen by
Marc Klemp
Brown University

  1. Coal Smoke and the Costs of the Industrial Revolution By W. Walker Hanlon
  3. Inequality, Financial Development and Economic Growth in the OECD, 1870-2011 By Jakob Brochner Madsen; MD. Rabiul Islam; Hristos Doucouliagos
  4. Ethnic Diversity and Poverty By Sefa Awaworyi Churchill; Russell Smyth
  5. Has trade been driving global economic growth? By Leon Podkaminer
  6. Autonomous demand, Harrodian instability and the supply side By Peter Skott
  7. Endogenous wage rigidities, human capital accumulation and growth By Ahmed Tritah
  8. How labor regulation a.ects innovation and investment: A neo-Schumpeterian approach. By Giorgio Calcagnini; Germana Giombini; Giuseppe Travaglini
  9. On the long-run growth effect of raising the retirement age By Kuhn, Michael; Prettner, Klaus
  10. Technology Diffusion, Pareto Distribution, and Patent Policy By Keiichi Kishi

  1. By: W. Walker Hanlon
    Abstract: While the Industrial Revolution brought economic growth, there is a long debate in economics over the costs of the pollution externalities that accompanied early industrialization. To help settle this debate, this paper introduces a new theoretically-grounded strategy for estimating the impact of industrial pollution on local economic development and applies this approach to data from British cities for 1851-1911. I show that local industrial coal use substantially reduced long-run city employment growth over this period. Moreover, a counterfactual analysis suggests that plausible improvements in coal use efficiency would have led to substantially higher urbanization rates in Britain by 1911.
    JEL: N13 N53 Q52 R11
    Date: 2016–12
  2. By: Jakob Brochner Madsen
    Abstract: This paper constructs annual data for the aggregate wealth-income ratio, W-Y, saving, s, and growth, g, for Britain over the period 1210-2013 and tests Piketty’s central hypothesis that the W-Y ratio is governed by the s-g ratio in the long run. Furthermore, Piketty’s model is extended by the share of non-reproducibles in total wealth to explain the W-Y ratio during different eras of capitalism – pre-industrialization, industrialization and the knowledge economy. It is shown that savings, growth and the share of non-reproducibles in total wealth have been the fundamental drivers of the W-Y ratio over the past eight centuries
    Keywords: W-Y ratio, inequality, non-reproducibles versus reproducibles factors of production
    JEL: E1 E2 O4 P1
    Date: 2016–11
  3. By: Jakob Brochner Madsen; MD. Rabiul Islam; Hristos Doucouliagos
    Abstract: Inequality's effect on growth remains elusive, largely due to endogeneity, complex interactions, and lead-lag relationships. We revisit this issue by examining the four main channels through which inequality transmits to growth: savings, investment, education, and knowledge production. We construct new panel data for 21 OECD countries spanning 142 years. External communist influence is used as a new time-varying instrument for inequality and the effects of inequality on the outcome variables are made conditional on the stage of financial development. Our results show that inequality hampers growth at low to moderate levels of financial development but promotes growth at advanced levels.
    Keywords: inequality, financial development, transmission channels
    JEL: E20 O15 O40
    Date: 2016–11
  4. By: Sefa Awaworyi Churchill; Russell Smyth
    Abstract: We examine the relationship between ethnic diversity and poverty for a cross-sectional sample of 60 developing countries. We measure diversity using indices of ethnic and linguistic fractionalization, and measure poverty using the multidimensional poverty index (MPI), multidimensional poverty headcount (MPH), intensity of deprivation, poverty gap and poverty headcount ratio. We find that ethnic and linguistic fractionalization contributes to poverty levels. Specifically, we find that a standard deviation increase in ethnic fractionalization is associated with a 0.37, 0.83 and 0.77 standard deviation increase in the MPI, MPH and the intensity of deprivation, respectively. Moreover, a standard deviation increase in ethnic fractionalization is associated with between a 0.30 and 0.56 standard deviation increase in the population living below $1.90 and $3.10, the poverty gap at $1.90 and $3.10 a day and the headcount ratio at $1.90 and $3.10 a day. Similar results are also observed for linguistic fractionalization with standardized coefficients ranging between 0.31 and 0.91. We find that our results are robust to alternative ways to measure fractionalization and poverty as well as alternative approaches to address endogeneity.
    Keywords: Ethnic diversity; poverty; fractionalization.
    Date: 2016–11
  5. By: Leon Podkaminer
    Abstract: The last 50 years have produced a series of revolutionary technological changes. These decades have also witnessed a truly revolutionary systemic change at the global level. The change started with step-wise internal liberalisations and deregulations in the major industrialised countries. The internal systemic changes have been synchronised with the consecutive waves of liberalisation of international economic relations. Advancing globalisation has been paralleled by the global economic growth becoming progressively slower and unstable. Using the standard tools of time series econometrics (VEC,Granger non-causality testing, ARDL) the paper suggests that trade has not been driving global economic growth (or even that expanding trade may have slowed down global output growth). Large and persistent trade imbalances which have become typical since the mid- 1970s are just one possible reason for trade no longer playing the positive role assigned to it in the trade theories. The second reason relates to the ‘race-to-thebottom’ tendencies with respect to the wage rate which have developed under globalisation. These tendencies may have been responsible for the persistent shortage of aggregate demand at the global level and – consequently – weakening global output growth.
    Keywords: world income, world trade, globalisation, wage-led growth, VEC, Granger causality
    JEL: F43 F15 F16 O47 O49
    Date: 2016
  6. By: Peter Skott (University of Massachusetts - Amherst)
    Abstract: A recent literature introduces autonomous demand as the driver of long-run economic growth and as a stabilizing force that tames Harrodian instability. The argument is unconvincing. The stabilizing effect is modest for plausible parameter values and, more importantly, it is questionable whether any components of aggregate demand can be viewed as autonomous in the long run. By contrast, models that include the supply side (the labor market) and/or economic policy can address Harrodian instability and produce level and growth effects that resemble those derived in the literature on autonomous demand.
    Keywords: supermultiplier, Harrodian instability, Kaleckian models
    JEL: E11 E12 O41
    Date: 2016
  7. By: Ahmed Tritah
    Date: 2016
  8. By: Giorgio Calcagnini (Department of Economics, Society, and Politics Universita' di Urbino Carlo Bo); Germana Giombini (Department of Economics, Society, and Politics Universita' di Urbino Carlo Bo); Giuseppe Travaglini (Universita' di Urbino Carlo Bo, Facolta' di Economia, DESP, Dipartimento di Economia Societa' e Politica)
    Abstract: Theoretical and empirical models provide ambiguous responses on the relationship between labor regulation, innovation and investment. Labor regulation tends to raise firms. adjustment costs. But, also, labor regulation stimulates firms to make innovations and investment to recover productivity in the long-run. In this paper we present a neo- Schumpeterian endogenous growth model, which explains how these opposite forces operate over time, and why a stricter labor regulation may positively a.ect innovation and investment.
    Keywords: Endogenous growth model; Labor regulation; Innovation, Investment.
    JEL: O4 J5
    Date: 2016–12
  9. By: Kuhn, Michael; Prettner, Klaus
    Abstract: We show that the long-run economic growth effect of an increase in the retirement age is unambiguously positive in research and development based endogenous growth models. This contrasts recent findings based on models of learning-by-doing-spillovers, in which an increase in the retirement age reduces physical capital accumulation and thereby economic growth. Our results imply that models based on learning-by-doing-spillovers, which are often used as a short-cut formulation for research and development based growth models, do not necessarily lead to similar policy conclusions.
    Keywords: demographic change,pension reform,long-run economic growth,R&D-based growth
    JEL: J10 J26 O30 O41
    Date: 2016
  10. By: Keiichi Kishi (Graduate School of Economics, Osaka University)
    Abstract: We develop a Schumpeterian growth model based on technology diffu- sion. Each rm has a different productivity level. New entrants enter into the targeted industries by learning the existing technologies owned by the other rms. Some of the new entrants succeed to adopt the frontier tech- nology. The other new entrants may adopt the non-frontier technologies. We show that if it is extremely difficult to adopt the frontier technology, the technology diffusion generates the Pareto distributions of rm size, productivity, and innovation size. Further, we introduce the minimum innovation size required for a patent into the model. That is, the patent office grants the patents only for superior inventions. We show that an increase in minimum innovation size may reduce the average patentable innovation size because of an endogenous response of the distribution of innovation size. This implies that if the patent office requires the superior innovations for the patents, it may cause innovators to produce a larger amount of inferior patentable innovations.
    Keywords: Technology diffusion, Innovation, Pareto distribution
    JEL: O30 O33 O34
    Date: 2016–12

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