nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒01‒15
sixteen papers chosen by
Marc Klemp
Brown University

  1. Is faster economic growth compatible with reductions in carbon emissions? The role of diminished population growth By Casey, Gregory; Galor, Oded
  2. How Destructive is Innovation? By Daniel Garcia-Macia; Chang-Tai Hsieh; Peter J. Klenow
  3. Growth and Childbearing in the Short- and Long-Run By Shoumitro Chatterjee; Tom Vogl
  4. A Cliometric Model of Unified Growth. Family Organization and Economic Growth in the Long Run of History By Claude Diebolt; Faustine Perrin
  5. Early Urbanization and the Persistence of Regional Disparities within Countries By Areendam Chanda; Dachao Ruan
  6. Australian Exceptionalism? Inequality and Living Standards 1821-1871 By Panza, Laura; Williamson, Jeffrey G
  7. The Rise of American Ingenuity: Innovation and Inventors of the Golden Age By Akcigit, Ufuk; Grigsby, John; Nicholas, Tom
  8. Economic and Demographic Interactions in Post World War France: A Gendered Approach By Magali Jaoul-Grammare; Faustine Perrin
  9. Human capital accumulation in France at the dawn of the XIXth century: Lessons from the Guizot Inquiry By Magali Jaoul-Grammare; Charlotte Le Chapelain
  10. Inequality and Growth; A Heterogeneous Approach By Francesco Grigoli; Evelio Paredes; Gabriel Di Bella
  11. Effects of Temperature Shocks on Economic Growth and Welfare in Asia By Lee, Minsoo; Villaruel, Mai Lin; Gaspar, Raymond
  12. To Augment Or Not To Augment? A Conjecture On Asymmetric Technical Change By Clemens Struck; Adnan Velic
  13. Two Stages of Economic Development By Gong, Gang
  14. There is poverty convergence By Crespo Cuaresma, Jesus; Klasen, Stephan; Wacker, Konstantin M.
  16. The Changing Structure of Africa's Economies By Xinshen Diao; Kenneth Harttgen; Margaret McMillan

  1. By: Casey, Gregory; Galor, Oded
    Abstract: We provide evidence that lower fertility can simultaneously increase income per capita and lower carbon emissions, eliminating a trade-off central to most policies aimed at slowing global climate change. We estimate the effect of lower fertility on carbon emissions, accounting for the fact that changes in fertility patterns affect carbon emissions through three channels: total population, the age structure of the population, and economic output. Our analysis proceeds in two steps. First, we estimate the elasticity of carbon emissions with respect to population and income per capita in an unbalanced yearly panel of cross-country data from 1950–2010. We demonstrate that the elasticity with respect to population is nearly seven times larger than the elasticity with respect to income per capita and that this difference is statistically significant. Thus, the regression results imply that 1% slower population growth could be accompanied by an increase in income per capita of nearly 7% while still lowering carbon emissions. In the second part of our analysis, we use a recently constructed economic-demographic model of Nigeria to estimate the effect of lower fertility on carbon emissions, accounting for the impacts of fertility on population growth, population age structure, and income per capita. We find that by 2100 C.E. moving from the medium to the low variant of the UN fertility projection leads to 35% lower yearly emissions and 15% higher income per capita. These results suggest that population policies could be part of the approach to combating global climate change.
    Keywords: Climate Change, Demography, Economic Growth
    JEL: J11 O40 Q50
    Date: 2017–01–05
  2. 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.
    Date: 2017–01
  3. By: Shoumitro Chatterjee; Tom Vogl
    Abstract: Despite being key to theories of economic growth and the demographic transition, evidence on how fertility responds to aggregate income change is mixed. We analyze economic growth and fertility change in the developing world over six decades, using data on 2.3 million women from 255 surveys in 81 countries. We find that fertility responds differently to fluctuations and long-run growth, and the nature of these responses varies over the lifecycle. Fertility is procyclical, falling during recessions, but also declines with long-run growth. Lifetime fertility is affected by fluctuations near the end of the reproductive period but not those at prime reproductive age. Our results are consistent with models linking demography, human capital, and long-run growth, extended to include a lifecycle with liquidity constraints.
    JEL: E32 J13 O47
    Date: 2016–12
  4. By: Claude Diebolt (BETA, University of Strasbourg Strasbourg, France); Faustine Perrin (Department of Economic History, Lund University, Sweden)
    Date: 2017
  5. By: Areendam Chanda; Dachao Ruan
    Abstract: We explore the extent to which present day economic development at the sub-national level captured by GDP per capita, urbanization, and night-time light density is correlated to regional economic development in 1850. Drawing on historical city data, we construct a measure of urban population density and other features of urbanization in 1850 for 2,055 sub-national regions covering 135 countries. We find strong evidence of persistence in regional development. In our baseline estimates, a one standard deviation increase in urban density in 1850 raises 2005 GDP per capita by almost 10%. Further, the presence of the largest national city in 1850 confers significant advantages to the region even 150 years later. While, our findings are robust to a large range of geographic and spatial controls, proximity to the coast and rivers continues to have a significant effect. We also find that while persistence is generally true there is also considerable heterogeneity across subsets of nations with it being strongest in Asia and West Europe. Finally, early urbanization is also associated with human capital and infrastructure differences across regions.
  6. By: Panza, Laura; Williamson, Jeffrey G
    Abstract: Although the Australian historical literature covering the colonies' first century from the initial convict settlement in 1788 at Botany Bay to the post-gold rush census of 1871 is packed with assertions about Australian living standards and inequality exceptionalism - compared with western Europe and America, there has been very little evidence offered to confirm them. This paper will establish the Australian facts about living standards and inequality trends between the 1820s and the 1870s. Where do we find exceptionalism, compared with the United States, and where not? And can exceptionalism be readily explained by the fact that the US was undergoing a dramatic industrial revolution while Australia was following its commodity-exporting comparative advantage? We start by exploring the end-period benchmark, 1871, where previous literature (since Michael Mulhall in 1892) has reported a big Australian income per capita and living standard lead. We ask whether 1871 is a poor choice for making these comparisons, and whether 1861 would be better. The US had just fought a Civil War and underwent a 'lost growth decade' and southern destruction in the 1860s (Lindert & Williamson 2016b). In addition, both countries had to deal with a mineral rent bust, one in Victoria and the other in California and Nevada. The result for 1861 without the devastated American south or the mineral-rich Victoria, California, and Nevada is a smaller Australian living standard lead, but a significant lead nonetheless. Next we ask whether Australia was born (relatively) rich or grew (relatively) rich by commodity-export-led (relatively) fast growth. It was the latter, a conclusion reached in two ways, indirectly à la Angus Maddison backcasting and directly à la historic purchasing-power- parity living standard estimates for the early years. Our new purchasing-power-parity estimates of working class living standards in the 1820s and 1830s place Australian towns below London. This not-born-relatively-rich conclusion is confirmed indirectly by an exceptionally fast growth performance between 1821 and 1871. In addition, we ask whether the convicts had similar living standards as free urban unskilled in the 1830s (the convicts were still nearly half of the labor force). We follow this with two additional questions: Was the 1871 Australian distribution of income as unequal as it was in the US and Western Europe then? Or was it exceptionally equal? If the latter, was it also as equal in the 1820s as it was in America in 1800? While we cannot yet answer either question, we can document inequality trends between those two dates by exploiting various proxies. Here we find exceptionalism since there is little evidence supporting rising income inequality over the half-century prior to 1871.
    Keywords: Colonial Australia; exceptionalism; growth; inequality; living standards
    JEL: N17 N37 O47
    Date: 2017–01
  7. By: Akcigit, Ufuk; Grigsby, John; Nicholas, Tom
    Abstract: We examine the golden age of US innovation by undertaking a major data collection exercise linking US patents to state and county-level aggregates and matching inventors to Federal Censuses between 1880 and 1940. We identify a causal relationship between patented inventions and long run economic growth and outline a basic framework for analyzing key macro and micro-level determinants. We explore drivers of regional performance including population density, financial development, geographic connectedness and social structure. We then profile the characteristics of inventors and their life cycle, measure the returns to technological development, and document the relationship between innovation, inequality and social mobility. Our new data help to address important questions related to innovation and long-run growth dynamics.
    Keywords: census; demographics; Earnings; growth; innovation; inventors; migration; patents
    JEL: N11 N12 O31 O40
    Date: 2017–01
  8. By: Magali Jaoul-Grammare (BETA, University of Strasbourg Strasbourg, France); Faustine Perrin (Department of Economic History, Lund University, Sweden)
    Date: 2016
  9. By: Magali Jaoul-Grammare (BETA, University of Strasbourg Strasbourg, France); Charlotte Le Chapelain (CLHDPP, BETA, University of Lyon 3)
    Date: 2017
  10. By: Francesco Grigoli; Evelio Paredes; Gabriel Di Bella
    Abstract: The combination of stagnant growth and high levels of income inequality renewed the debate about whether a more even distribution of income can spur economic activity. This paper tests for cross-country convergence in income inequality and estimates its impact on economic growth with a heterogeneous panel structural vector autoregression model, which addresses some empirical challenges plaguing the literature. We find that income inequality is converging across countries, and that its impact on economic growth is heterogeneous. In particular, while the median response of real per capita GDP growth to shocks in income inequality is negative and significant, the dispersion around the estimates is large, with at least one fourth of the countries in the sample presenting a positive effect. The results suggest that the negative effect is mainly driven by the Middle East and Central Asia and the Western Hemisphere across regions, and emerging markets across income levels. Finally, we find evidence that improved institutional frameworks can reduce the negative effect of income inequality on growth.
    Keywords: Income inequality;Income distribution;Economic growth;Structural vector autoregression;Panel analysis;Econometric models;Heterogeneity, Gini, income distribution, income inequality, income levels, growth, regions.
    Date: 2016–12–16
  11. By: Lee, Minsoo (Asian Development Bank); Villaruel, Mai Lin (Asian Development Bank); Gaspar, Raymond (Asian Development Bank)
    Abstract: Using the Burke, Hsiang, and Miguel (2015) framework, we examine the nonlinear response effect of economic growth to historic temperature and precipitation fluctuations. We confirm that aside from the significant effect of rising temperature on agricultural production, industrial production and investment endeavors also serve as other potential channels through which temperature significantly affects overall economic productivity. We find the overall economic productivity of developing Asia to be at least 10% lower by 2100 relative to business as usual. We also empirically analyze policy measures and factors that could help countries mitigate consumption volatility driven by climate change-related events. Consistent with several microlevel findings, financial inclusiveness helps households mitigate consumption volatility amid temperature change. Likewise, government plays a critical role in moderating the negative impact of rising temperature in both output and consumption.
    Keywords: climate change; consumption volatility; developing Asia; global warming
    JEL: I30 Q54 Q58
    Date: 2016–12–14
  12. By: Clemens Struck (University College Dublin); Adnan Velic (Dublin Institute of Technology)
    Abstract: Following standard macroeconomic theory, a non-increasing long-run share of labor in income combined with a capital-labor substitution elasticity of less than unity implies that productivity growth should be labor-augmenting. Employing an industry decomposition for the U.S., we find that technical progress is factor neutral. However, we stress potential inflation measurement errors manifested in the form of non-positive long-term productivity growth in a number of industries. We illustrate that estimates of the bias of technical change are quite sensitive to these measurement issues. If aggregate inflation is annually overstated by as little as a third of a percentage point, technical progress is already over 50 percent higher in the labor-intensive sector than in the capital-intensive sector. Thus, even the presence of small positive inflation biases could very well mean that technical change is notably labor augmenting.
    Keywords: technical change, labor-augmenting, measurement error, inflation bias
    JEL: E1 E13 E31 O31
    Date: 2017–01
  13. By: Gong, Gang (Asian Development Bank Institute)
    Abstract: We suggest that the development process of a less-developed country can be divided into two stages, which demonstrate significantly different properties in areas such as structural endowments, production modes, income distribution, and the forces that drive economic growth. The two stages of economic development have been indicated in the growth theory of macroeconomics and in the various “turning point” theories in development economics, including Lewis’s dual economy theory, Kuznets curve, and the middle-income trap. A dynamic macroeconomic model is constructed to simulate the development process that reveals these two stages. Using the two-stage theory of economic development, we find that the People’s Republic of China’s economy is currently at the intersection between the first and second stages. This is the definition of “new normal” in the current Chinese economy.
    Keywords: two stages of economic development; dual economy theory; Kuznets curve; economic growth; new normal
    JEL: C61 C62 E10 O11
    Date: 2016–12–31
  14. By: Crespo Cuaresma, Jesus; Klasen, Stephan; Wacker, Konstantin M.
    Abstract: Martin Ravallion ("Why Don't We See Poverty Convergence?" American Economic Review, 102(1): 504-23; 2012) presents evidence against the existence of convergence in global poverty rates despite convergence in household mean income levels and the close linkage between income growth and poverty reduction. We show that this finding is driven by a specification that demands more than simple convergence in poverty headcount rates and assumes a growth elasticity of poverty reduction, which is well-known to accelerate with low initial poverty levels. If we motivate the poverty convergence equation using an arguably superior growth semi-elasticity of poverty reduction, we find highly significant and robust evidence of convergence in absolute poverty headcount ratios and poverty gaps. Relatedly, we show that the results in Ravallion (2012) are driven by the special income growth and poverty dynamics in Central and Eastern European transition economies that started with low initial poverty rates and thus observed a high elasticity of poverty reduction. Once we control for their abnormal poverty dynamics, we again find robust evidence of global convergence in poverty, even in the original specification by Ravallion (2012). (authors' abstract)
    Keywords: poverty convergence; economic growth; poverty trap; transition economies
    Date: 2016–01
  15. By: Shakhnoza Ganisherovna Akramova
    Abstract: This article investigates the channels through which human capital development could stimulate economic development in case of demographic transition. The ways of the efficient use of the demographic situation for the effective functioning of the human capital have been proposed. Key words: human capital; economic growth; age structure; demographic trends; fertility rate; life expectancy. Policy
    Date: 2016–09
  16. By: Xinshen Diao; Kenneth Harttgen; Margaret McMillan
    Abstract: Using data from the Groningen Growth and Development Center’s Africa Sector Database and the Demographic and Health Surveys, we show that much of Africa’s recent growth and poverty reduction has been associated with a substantive decline in the share of the labor force engaged in agriculture. This decline is most pronounced for rural females over the age of 25 who have a primary education; it has been accompanied by a systematic increase in the productivity of the labor force, as it has moved from low productivity agriculture to higher productivity services and manufacturing. We also show that although the employment share in manufacturing is not expanding rapidly, in most of the low-income African countries, the employment share in manufacturing has not peaked and is still expanding, albeit from very low levels. More work is needed to understand the implications of these shifts in employment shares for future growth and development in Africa south of the Sahara.
    JEL: O11 O4 O55
    Date: 2017–01

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