nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒02‒12
eleven papers chosen by
Marc Klemp
Brown University

  1. Long-Range Growth: Economic Development in the Global Network of Air Links By Campante, Filipe R.; Yanagizawa-Drott, David
  2. Growth and Childbearing in the Short- and Long-Run By Shoumitro Chatterjee; Tom S. Vogl
  3. The Rise of the Middle Class and Economic Growth in ASEAN By Markus Brueckner; Era Dabla-Norris; Mark Gradstein; Daniel Lederman
  4. Aggregating the Fertility Transition: Intergenerational Dynamics in Quality and Quantity By Tom S. Vogl
  5. The Recent Growth Boom in Developing Economies: A Structural-Change Perspective By Diao, Xinshen; McMillan, Margaret; Rodrik, Dani
  6. Human Capital Acquisition and Occupational Choice: Implications for Economic Development By Mestieri, Martí; Schauer, Johanna; Townsend, Robert M
  7. On the Origins and Consequences of Racism By Farfan-Vallespin, Antonio; Bonick, Matthew
  8. Determinants of Property Rights Protection in Sub-Saharan Africa By Asongu, Simplice; Kodila-Tedika, Oasis
  9. Determinants of long-term economic Growth redux: A Measurement Error Model Averaging (MEMA) approach. By Doppelhofer, Gernot; Hansen, Ole-Petter Moe; Weeks, Melvyn
  10. Reconciling Models of Diffusion and Innovation: A Theory of the Productivity Distribution and Technology Frontier By Jess Benhabib; Jesse Perla; Christopher Tonetti
  11. The Lion on the Move Towards the World Frontier: Catching Up or Remaining Stuck? By Murat Ungor; Tarek M. Harchaoui

  1. By: Campante, Filipe R. (Harvard University); Yanagizawa-Drott, David (University of Zurich)
    Abstract: We study the impact of international long-distance flights on the global spatial allocation of economic activity. To identify causal effects, we exploit variation due to regulatory and technological constraints which give rise to a discontinuity in connectedness between cities at a distance of 6000 miles. We show that these air links have a positive effect on local economic activity, as captured by satellite-measured night lights. To shed light on how air links shape economic outcomes, we first present evidence of positive externalities in the global network of air links: connections induce further connections. We then find that air links increase business links, showing that the movement of people fosters the movement of capital. In particular, this is driven mostly by capital flowing from high-income to middle-income (but not low-income) countries. Taken together, our results suggest that increasing interconnectedness generates economic activity at the local level by inducing links between businesses, but also gives rise to increased spatial inequality locally, and potentially globally.
    JEL: F15 F21 F23 F63 O11 O18 O19
    Date: 2016–09
  2. By: Shoumitro Chatterjee (Princeton University); Tom S. Vogl (Princeton University)
    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 life cycle. Fertility is procyclical, falling during recessions, but also declines and delays 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 life cycle with liquidity constraints.
    JEL: J13 O40
    Date: 2016–12
  3. By: Markus Brueckner; Era Dabla-Norris; Mark Gradstein; Daniel Lederman
    Abstract: We present estimates of the relationship between the share of income accruing to the middle class and GDP per capita of ASEAN economies. The increase in GDP per capita that ASEAN economies experienced during 1970-2010 significantly contributed to a higher share of income accruing to the middle class in these countries. The impact of a rise of the middle class on economic growth depends on ASEAN countries' initial level of GDP per capita. In the majority of ASEAN countries, a rise of the middle class that is unrelated to GDP per capita growth would have had a significant negative effect on economic growth based on values of these countries' GDP per capita in 1970. In contrast, for recent values of GDP per capita a rise of the middle class would positively contribute to GDP per capita growth. We show that human capital accumulation is an important channel through which a rise of the middle class affects economic growth.
    Keywords: Income Inequality, Economic Growth, ASEAN
    JEL: O1
    Date: 2017–01
  4. By: Tom S. Vogl (Princeton University, BREAD, and NBER)
    Abstract: Fertility change is distinct from other forms of social and economic change because it directly alters the size and composition of the next generation. This paper studies how changes in population composition over the fertility transition feed back into the evolution of average fertility across generations. Theory predicts that changes in the relationship between human capital and fertility first weaken and then strengthen fertility similarities between mothers and daughters, a process that first promotes and then restricts aggregate fertility decline. Consistent with these predictions, microdata from 40 developing countries over the second half of the 20th century show that intergenerational fertility associations strengthen late in the fertility transition, due to the alignment of the education-fertility relationship across generations. As fertility approaches the replacement level, the strengthening of these associations reweights the population to raise aggregate fertility rates, pushing back against aggregate fertility decline.
    JEL: J13
    Date: 2017–01
  5. By: Diao, Xinshen; McMillan, Margaret; Rodrik, Dani
    Abstract: Growth has accelerated in a wide range of developing countries over the last couple of decades, resulting in an extraordinary period of convergence with the advanced economies. We analyze this experience from the lens of structural change - the reallocation of labor from low- to high-productivity sectors. Patterns of structural change differ greatly in the recent growth experience. In contrast to the East Asian experience, none of the recent growth accelerations in Latin America, Africa, or South Asia was driven by rapid industrialization. Beyond that, we document that recent growth accelerations were based on either rapid within-sector labor productivity growth (Latin America) or growth-increasing structural change (Africa), but rarely both at the same time. The African experience is particularly intriguing, as growth-enhancing structural change appears to have come typically at the expense of declining labor productivity growth in the more modern sectors of the economy. We explain this anomaly by arguing that the forces that promoted structural change in Africa originated on the demand side, through either external transfers or increase in agricultural incomes. In contrast to Asia, structural change was the result of increased demand for goods and services produced in the modern sectors of the economy rather than productivity improvements in these sectors.
    Date: 2017–01
  6. By: Mestieri, Martí; Schauer, Johanna; Townsend, Robert M
    Abstract: Using household-level data from Mexico we document patterns among schooling, entrepreneurial decisions and household characteristics such as assets, talent of household members and age of the household head. Motivated by our findings, we develop a heterogeneous-agent, incomplete- markets, overlapping-generations dynasty model. Households jointly decide over their life cycle on (i) kids' human capital investments (schooling) and (ii) parents' entry, exit and investment into alternative entrepreneurial modes (subsistence and modern). With financial constraints all of these are co-determined. A calibrated version of our model can account for the broad correlation patterns uncovered in the data within and across generations, e.g., a non-monotonic relationship between educational choices and assets across occupations, growth in profits and employment for modern firms only, and dynastic persistence across generations in education and wealth. Endogenous human capital acquisition is a key driver of inequality and intergenerational persistence. Eliminating this channel would decrease the top 10% income share by 47%. Eliminating within-period borrowing constraints would increase average household expenditure by 7.1% and benefit the middle class, reducing top and bottom expenditure shares. It would also reduce by 28% the correlation between household assets and kids' schooling levels.
    Keywords: entrepreneurship; Human Capital; inequality; Mexico; Occupational choice
    JEL: I24 I25 O15 O54
    Date: 2017–02
  7. By: Farfan-Vallespin, Antonio; Bonick, Matthew
    Abstract: We use a novel method to measure racism at both the individual and the country level. We show that our measure of racism has a strong negative and significant impact on economic development, quality of institutions and education. We then test different hypotheses concerning the origin of racism and its channels of impact in order to establish causality. We find that racism is not correlated with any possible measure of coexistence of different racial or ethnic groups, like ethno-linguistic fragmentation, share of migrants, or ethnically-motivated conflicts among others. Racism has a negative effect on social capital measured as generalized trust and voice and accountability. More importantly, we show that for former colonies, racism is strongly correlated with the presence of extractive institutions during the colonial time, even when we control for current institutions, current GDP per capita or current education. We argue that extractive colonial institutions not only had a negative impact on the political and economic institutions of the colonized countries, but also shaped the cultural values of the population. We claim that colonial powers instilled racism among the population of their colonies in order to weaken their ability for collective action, justify their own role as extractive elite in the eyes of the ruled and facilitate the internal cohesion of the elite. We also show that, at the individual level and using country fixed effects, racism is negatively correlated with those cultural values that one would expect if an extractive elite would be able to decide the cultural values of the society they control: lower trust, higher obedience, lower respect for others, lower feeling of control of one's live, lower preference for democracy, higher support for military intervention of the government, lower preference for political participation, lower valuation of civil rights, higher preference for state intervention in the economy, lower support for economic competition, and higher acceptance of dishonest behavior. We finally show that racism still has a significant impact on our outcome variables even when we control for these potential cultural correlates.
    JEL: O10 P48 N00
    Date: 2016
  8. By: Asongu, Simplice; Kodila-Tedika, Oasis
    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
  9. By: Doppelhofer, Gernot (Dept. of Economics, Norwegian School of Economics and Business Administration); Hansen, Ole-Petter Moe (Dept. of Economics, Norwegian School of Economics and Business Administration); Weeks, Melvyn (University of Cambridge)
    Abstract: This paper estimates determinants of long-run growth rates of GDP per capita in a cross section of countries. We propose a novel Measurement Error Model Averaging (MEMA) approach that accounts for measurement error in international income data as well as model uncertainty. Estimating the model using eight vintages of the Penn World Tables (PWT) together with other proposed growth determinants, we identify 18 variables related to economic growth. The results are robust to allowing for outliers in the form of heteroscedastic model errors.
    Keywords: growth regression; robust growth determinants; measurement error; Bayesian modelling
    JEL: C11 C82 E01 O47
    Date: 2016–12–21
  10. By: Jess Benhabib; Jesse Perla; Christopher Tonetti
    Abstract: We study how innovation and technology diffusion interact to endogenously determine the productivity distribution and generate aggregate growth. We model firms that choose to innovate, adopt technology, or produce with their existing technology. Costly adoption creates a spread between the best and worst technologies concurrently used to produce similar goods. The balance of adoption and innovation determines the shape of the distribution; innovation stretches the distribution, while adoption compresses it. Whether and how innovation and diffusion contribute to aggregate growth depends on the support of the productivity distribution. With finite support, the aggregate growth rate cannot exceed the maximum growth rate of innovators. Infinite support allows for “latent growth”: extra growth from initial conditions or auxiliary stochastic processes. While innovation drives long-run growth, changes in the adoption process can influence growth by affecting innovation incentives, either directly, through licensing excludable technologies, or indirectly, via the option value of adoption.
    JEL: O14 O30 O31 O33 O40
    Date: 2017–01
  11. By: Murat Ungor (Department of Economics, University of Otago, New Zealand); Tarek M. Harchaoui (Faculty of Economics and Business, Global Economics & Management, Nettelbosje, the Netherlands)
    Abstract: The remarkable growth spurt reported by the Sub-Saharan African (SSA) economy since the mid-1990s offers the opportunity to revisit the narrative of its economic development experience. We investigate whether the SSA economy has initiated a gradual process of convergence which reverses the long-term fall so far behind the U.S. frontier. Our framework begins with a top-down approach that performs a nested development accounting exercise. This aggregate analysis complements a bottom-up approach that tracks the sectoral origins of the SSA aggregate relative labor productivity performance. The application of this framework to a representative sample of the SSA economy over the 1970-2010 period suggests the following set of results. After one-quarter of a century of falling behind the U.S. level of real income per capita, the SSA economy observed a swift turnaround towards the end of the 1990s, yet without showing any sign of catch-up. Second, parallel to favorable demographic developments, SSA reports a startling relative labor productivity gap which accounts for much of its relative income per capita gap. Third, the use of the concept of cognitive skills reveals that human capital considerations have worsened o_ over time, making total factor productivity no longer the biggest part of the story underlying relative labor productivity differences. Fourth, the sectoral evidence points to the coexistence of headwinds (negative within- and reallocation-effects) and tailwinds (between-effects) which tend to cancel out each other, thus preventing SSA aggregate economic performance to get anywhere closer to the world frontier even during the growth spurt period.
    Keywords: Convergence; productivity; capital formation; structural change
    JEL: N10 O47 O55 O57
    Date: 2016–01

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