nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒01‒08
eight papers chosen by
Marc Klemp
Brown University

  1. How Destructive is Innovation? By Daniel Garcia-Macia; Chang-Tai Hsieh; Peter J. Klenow
  2. Modernization, Social Identity, and Ethnic Conflict By Yuki, Kazuhiro
  3. Ethnic Diversity and Educational Attainment By Sefa Awaworyi Churchill; Ahmed Salim Nuhu
  4. Human Accomplishment and Growth in Britain since 1270: The Role of Great Scientists and Education By Jakob Brochner Madsen
  5. The Plough, Gender Roles, and Corruption By Hazarika, Gautam
  6. Back to Basics: Basic Research Spillovers, Innovation Policy and Growth By Akcigit, Ufuk; Hanley, Douglas; Serrano-Velarde, Nicolas
  7. The modern revival of the Classical surplus approach: implications for the analysis of growth and crises By Sergio Cesaratto
  8. Demand Drives Growth All The Way By Lance Taylor; Duncan K Foley; Armon Rezai; Luiza Pires; Ozlem Omer; Ellis Scharfenaker

  1. By: Daniel Garcia-Macia; Chang-Tai Hsieh; Peter J. Klenow
    Abstract: Entrants and incumbents can create new products and displace the products of competitors. Incumbents can also improve their existing products. How much of aggregate productivity growth occurs through each of these channels? Using data from the U.S. Longitudinal Business Database on all non-farm private businesses from 1976–1986 and 2003–2013, we arrive at three main conclusions: First, most growth appears to come from incumbents. We infer this from the modest employment share of entering firms (defined as those less than 5 years old). Second, most growth seems to occur through improvements of existing varieties rather than creation of brand new varieties. Third, own-product improvements by incumbents appear to be more important than creative destruction. We infer this because the distribution of job creation and destruction has thinner tails than implied by a model with a dominant role for creative destruction.
    JEL: E24 O3 O4 O5
    Date: 2016–12
  2. By: Yuki, Kazuhiro
    Abstract: Empirical evidence suggests that ethnic divisions in a society leads to negative outcomes in civil conflict and economic development, among others. It is often argued that the lack of shared social identity, that is, the dominance of subnational (particularly, ethnic) identities over national identity, lies behind the negative outcomes. If shared national identity is important, how can it be realized? Some stress the effectiveness of "nation-building" policies in strengthening national identity. Meanwhile, there exist conflicting theses on effects of the modernization of a society on national identity in political science, the classic thesis (such as Deutsch, Gellner, Weber) arguing positive effects and the competing thesis (such as Melson and Wolpe, Bates) arguing negative effects. Which thesis is more relevant under what conditions? How does modernization affect identity, conflict, and development? How do policies such as "nation-building" policies affect the outcomes? In order to examine these questions theoretically, this paper develops a model of social identity, ethnic conflict, and development. In the model, individuals choose a sector to work (between the modern sector and a traditional sector), social identity (between ethnic identity and national identity), and contributions to ethnic conflict. Thus, the degree of modernization (and output), identity, and conflict interact with each other.
    Keywords: ethnic conflict, social identity, modernization, nation building, economic development
    JEL: D72 D74 O10 O20
    Date: 2016–12–22
  3. By: Sefa Awaworyi Churchill; Ahmed Salim Nuhu
    Abstract: This study attempts to explain the effects of ethnic and linguistic diversity on educational attainment. We argue that cross-section differences in ethnic and linguistic fractionalization can explain a substantial part of the cross-country differences in educational attainment levels. Using a data on 86 countries, we uncover new evidence on the relationship between fractionalization and educational attainment. We find that fractionalization lower educational attainment. This finding is consistent across various measures of educational attainment, and is robust to several sensitivity checks. We explore several potential mechanisms which could explain the observed negative effects of ethnic and linguistic diversity including ethnic diversity’s effect on social capital, discrimination, public goods, conflicts, and institutional quality, among others.
    Keywords: ethnic diversity; educational attainment; schooling; fractionalization
    JEL: J15 O5 H52 I21
    Date: 2016–01
  4. By: Jakob Brochner Madsen
    Abstract: This paper constructs annual data on primary, secondary and tertiary education, significant inventions and great scientists in the period 1270-2011 for Britain to investigate the influence of education and science on the economic development of Britain. Institutions, culture, real book prices and other variables are used to trace the origin of innovations, great scientists and educational attainment. The regressions show that education, a highly innovative environment and knowledge spillovers were influential in shaping British economic development over the period 1270-2011.
    Keywords: Economic growth, science, education, institutions, culture
    JEL: O30 O40
    Date: 2016–01
  5. By: Hazarika, Gautam (The University of Texas Rio Grande Valley)
    Abstract: Cross-national empirical studies of corruption commonly find that nations in which women play a greater role in economic and public life suffer less corruption. This finding has been controversial in that measures of women's participation in the labour force and politics are potentially endogenous. This study uses an aspect of national ancestral geography as an instrumental variable towards estimating the true causal effect of gender upon corruption. The ensuing estimates indicate that ordinary least squares estimates of the coefficients of regressors measuring women's economic and political influ-ence, in regressions in which measured corruption is the dependent variable, are substantially biased.
    Keywords: gender, corruption
    JEL: J16 D73
    Date: 2016–12
  6. By: Akcigit, Ufuk; Hanley, Douglas; Serrano-Velarde, Nicolas
    Abstract: This paper introduces a general equilibrium model of endogenous technical change through basic and applied research. Basic research differs from applied research in the nature and the magnitude of the generated spillovers. We propose a novel way of empirically identifying these spillovers and embed them in a framework with private firms and a public research sector. After characterizing the equilibrium, we estimate our model using micro-level data on research expenditures by French firms. Our key finding is that standard innovation policies (e.g., uniform R&D tax credits) can accentuate the dynamic misallocation in the economy by oversubsidizing applied research. Policies geared towards public basic research and its transmission to the private sector are significantly welfare improving.
    Keywords: applied research; basic research; Endogenous Growth; government spending; innovation; productivity; Research and Development; spillover.
    JEL: J82 L25 L50 O31 O38 O40
    Date: 2016–12
  7. By: Sergio Cesaratto
    Abstract: The paper reviews the main elements of Modern Classical Theory in view of the analysis of contemporary societies and in particular: the recovery of the Classical and Marxist “surplus approach” as a solid foundation for the analysis of social conflict; a demand-led theory of the level and growth of output based on the rejection of Say’s Law and the recovery of the notion of “external markets” put forward by Rosa Luxembourg and Kalecki, as the framework for the investigation of growth and crises in different historical phases of capitalism; the dismantling of the analytical core of Marginalism and of its laissez-faire policy prescriptions; and finally, the rejection of methodological individualism and of subjectivism in economic analysis and the preservation of the analytical methods of the Classical economists and Marx. In this regard, the paper underlines some differences with other heterodox schools, but also convergence with endogenous money theory and with systemic views of technical change.
    Keywords: Classical economists, Sraffa, Kalecki, Keynes, Surplus approach, heterodox economics
    JEL: B12 B24 B51 E11
    Date: 2016–08
  8. By: Lance Taylor; Duncan K Foley; Armon Rezai; Luiza Pires; Ozlem Omer; Ellis Scharfenaker (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: This paper makes three contributions to the existing literature on economic growth: first, we provide a demand-driven alternative to the conventional supply side Solow-Swan growth model. The model’s medium run is built around MarxGoodwin cycles of demand and distribution. Second, we introduce wage income of “capitalist” households. The Samuelson-Modigliani steady state “dual” to Pasinetti’s cannot be stable when capitalists have positive wages. Finally, we speak to the discussion triggered by Piketty on the stability of wealth concentration and its relation to the profitability of capital. Our demand-driven model of the long run satisfies Kaldor’s stylized facts (the gold standard of growth theory) and generates sustained economic growth with the capitalists’ share of wealth stabilizing between zero and one. Complications arising from “excess” capital gains and how well the model fits the data are briefly considered.
    Keywords: Demand, Growth, Keynes
    JEL: B51 E12
    Date: 2016–04

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