nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒02‒19
twelve papers chosen by
Marc Klemp
Brown University

  1. The Impact of Institutions on Innovation By Donges, Alexander; Meier, Jean-Marie A.; Silva, Rui C.
  2. European Influence and Economic Development By Theo S. Eicher; David J. Kuenzel
  3. Ancestry, Diversity & Finance: Evidence from Transition Economies By Dombi, Akos; Grigoriadis, Theocharis
  4. Swedish GDP 1300-1560: A Tentative Estimate By Krantz, Olle
  5. Entrepreneurial Status, Social Norms, and Economic Growth By Dimitrios Varvarigos; Nikolaos Kontogiannis
  6. Refugee Resettlement, Redistribution and Growth By Leonid Azarnert
  7. Does Infrastructure Really Explain Economic Growth in Sub-Saharan Africa? By Odongo Kodongo; Kalu Ojah
  8. Natural Resources, Oil and Economic Growth in Sub-Saharan Africa By Janda, Karel; Quarshie, Gregory
  9. Economic Growth and the Cultural Transmission of Attitudes towards Education By Dimitrios Varvarigos
  10. Modeling growth: exogenous, endogenous and Schumpeterian growth models By Ugur, Mehmet
  11. The Recent Growth Boom in Developing Economies: A Structural Change Perspective By Xinshen Diao; Margaret McMillan; Dani Rodrik
  12. Spatial Spillover Effects of Debt Relief from the Heavily Indebted Poor Countries (HIPC) Initiative By Joshua C. Hall; Serkan Karadas; Minh Tam T. Schlosky

  1. By: Donges, Alexander; Meier, Jean-Marie A.; Silva, Rui C.
    Abstract: This paper studies the impact of radical institutional reform on innovation. We use the timing and geography of French invasions of different regions of Germany after the French revolution of 1789 as an exogenous shock to the institutions of those regions. German regions that were invaded by the French subsequently changed their institutions in important ways, including the introduction of the civil code, the dissolution of guilds, the abolition of serfdom and the implementation of agrarian reforms. These institutional changes in turn affect innovation. Using patents per capita as our measure of innovation, we show that counties whose institutions are more inclusive as a result of the French occupation also become more innovative. Moving from a county with no occupation to a county with the longest occupation, the implied changes in institutional reforms result in an increase of patents per capita of 123%. Our findings point to institutions as a first order determinant of innovation and highlight the role of innovation as a key mechanism through which institutions may foster economic growth.
    JEL: N13 O31 O33
    Date: 2016
  2. By: Theo S. Eicher (University of Washington); David J. Kuenzel (Economics Department, Wesleyan University)
    Abstract: The development accounting literature identifies political institutions as fundamental development determinants. Forms of government or executive constraints are thought to shape economic institutions (e.g., property rights) which provide the necessary incentives for economic growth. The consensus in this literature is that European influence affects economic development, presumably via the adoption of European institutions. But how exactly did European influence in the distant past induce positive economic outcomes today? While previous approaches rely on “language,” “settler mortality,” “legal origins,” or the “number of European settlers” as indirect proxies of European influence, we propose a direct and quantifiable mechanism: the adoption of European constitutional features. We construct a dataset of all constitutional dimensions in all countries from 1800-2008, and find that nations experience growth spurts after adopting features of European constitutions. The growth effects are influenced (negatively) by periods of political turmoil, but they are independent of colonial backgrounds. These results imply that countries have been able to overcome adverse initial conditions over the last 200 years by adjusting European influence via the adoption of European constitutional features. Our constitutional dataset is also sufficiently detailed to identify which dimensions of European constitutions matter for development, namely legislative rules and provisions that curtail executive power.
    Keywords: Institutions, Constitutions, Economic Growth
    JEL: O10 P48 O43
    Date: 2017–01
  3. By: Dombi, Akos; Grigoriadis, Theocharis
    Abstract: In this paper, we analyze the growth effects of historical and biological ancestry, diversity and financial development in transition economies. We show that the common indicators of ethnolinguistic fractionalization, state history and genetic distance yield significant results and to some extent transform the impact of finance on growth in East-Central Europe and the former Soviet Union. Deep ethnolinguistic cleavages produce insignificant results, whereas at intermediate and lower levels of aggregation diversity is likely to significantly improve the effect of finance on growth. Similarly to finer ethnolinguistic cleavages, genetic distance from the United States also favorably increases the relevance of financial development for growth. However, state history as a proxy for long-run ancestral exposure to institutions, political organization and centralization reinforces the negative growth effect of financial development. We argue that financial development is inclined to resolve problems arising from coordination failures and absence of trust in diverse societies by easing liquidity constraints and offering incentives for entrepreneurship to minority groups. In contrast, long state history is likely to generate extractive institutions that facilitate the provision of soft budget constraints. Genetic distance from the United States induces higher reliance on continental rather than Anglo-Saxon financing practices, and therefore increases dependence on banks rather than bonds or equity for external liquidity purposes.
    Keywords: financial development,economic growth,state history,ethnolinguistic diversity,genetic distance,transition economies
    JEL: G21 O15 O43 P26 P51 Z10
    Date: 2017
  4. By: Krantz, Olle (Department of Geography and Economic History)
    Abstract: This study presents a reconstruction of historical national accounts for Sweden 1300-1560. The source material for this period is very scanty and, therefore, many estimates and approximations were necessary. For agriculture the so called demand approach was used, implying utilization of price series and assumptions on price, income and cross elasticities. Furthermore, population figures had to be estimated. For the other sectors estimations of various kinds also had to be made. Nevertheless, the series for GDP and GDP per capita give a fairly reasonable picture of the economic performance. Sweden’s GDP per capita in relation to some other countries is also discussed. The country seems to have been at about the same level as England. A forward glance indicates that Sweden’s economy stagnated in the 18th century and became backward compared to England and Holland. It was first after some decades of the 19th century that a recovery came and a fast economic growth started.
    Keywords: historical national accounts; GDP; demand approach; deflating
    JEL: N13 O10 O47
    Date: 2017–02–07
  5. By: Dimitrios Varvarigos; Nikolaos Kontogiannis
    Abstract: We offer a behavioural approach on the relation between growth and volatility, based on a monetary growth model where entrepreneurs borrow funds to invest in projects that produce capital goods. In addition to their varying pecuniary returns, different projects also vary with respect to the status they confer to the entrepreneurs who operate them. We show that social status promotes capital accumulation. We also show that, even when the status-induced increase of marginal utility is constant over time, the interaction between status and inflation is an additional source of transitional dynamics. When a social norm links this increase of marginal utility to past outcomes, however, the dynamics can generate endogenous cycles in the transition to the balanced growth path.
    Keywords: Social status, Norms, Economic growth, Cycles
    JEL: E32 O42 Z10
    Date: 2017–01
  6. By: Leonid Azarnert
    Abstract: This paper studies the effect of refugee resettlement on human capital accumulation. The analysis is performed in a growth model with endogenous fertility. I propose a redistribution scheme and show that refugee resettlement from a more advanced and wealthier economy to a less advanced and less wealthy economy combined with income transfers can give rise to conditions in which utility of indigenous populations in both countries increases. I also derive conditions for the proposed resettlement policy to stimulate human capital accumulation and hence economic growth in both economies.
    Keywords: Refugee resettlement, fertility, human capital, growth
    JEL: D3 F22 J1 O1
    Date: 2017–01
  7. By: Odongo Kodongo; Kalu Ojah
    Abstract: In the light of Africa’s palpable deficit in public infrastructure, we use System GMM to estimate a model of economic growth augmented by an infrastructure variable, for a panel of 45 Sub-Saharan African countries, over the period 2000-2011. We find that it is the spending on infrastructure and increments in the access to infrastructure that influence economic growth and development in Sub-Saharan Africa. Interestingly, these significant associations, especially those of infrastructure spending, are more important for lesser developed economies of the region than for the relatively more developed economies, which uncommonly have better than near-zero access to infrastructure. In addition to these robust direct links between the target variables, we find importantly that infrastructure access, and quality, also relate to economic growth indirectly via export diversification (trade competitiveness), and cross-border capital flows and export diversification, respectively. Among other important policy derivatives of our findings, we emphasize that efforts aimed at reversing Africa’s pervasive infrastructure deficit, in ways that enable economic growth and development, must be carefully nuanced.
    Keywords: Infrastructure access, infrastructure stock and quality, economic growth, Sub-Saharan Africa, System GMM
    JEL: H54 O11 O40 O55
    Date: 2016–12
  8. By: Janda, Karel; Quarshie, Gregory
    Abstract: This paper takes a critical look at the natural resource curse in countries in sub-Saharan Africa and it highlights the role of institutionalised authority. The paper first provides a comprehensive literature review of natural resource curse, Dutch disease and the role of oil resources in resource curse. This is follow by the description of the relevant economic factors in sub-Saharan Africa, which is taken as prime example of the region with both important oil and other natural resources and with serious economic growth problems.
    Keywords: Economic Growth; Natural Resources; Oil; Institutions; Sub-Saharan Africa
    JEL: O43 P52 Q43
    Date: 2017–02–10
  9. By: Dimitrios Varvarigos
    Abstract: This analysis investigates path-dependencies in a growing economy where altruistic parents try to inculcate their children with a behavioural trait that is conducive to human capital formation. The initial stock of physical capital is critical because it shapes the population dynamics of behavioural traits which, in turn, impinge on the formation of physical and human capital. Despite the absence of a complementarity in the process of cultural instruction, the long-run equilibrium can also depend on the initial distribution of behavioural traits among the population, as long as the efficiency of the external elements of cultural transmission is sufficiently low for households with parents who did not adopt the human capital-promoting trait when they, themselves, were young
    Keywords: Cultural transmission; Economic growth; Path-dependency; Education
    JEL: I25 J13 O40 Z10
    Date: 2017–02
  10. By: Ugur, Mehmet
    Abstract: In this lecture, I review the theoretical origins of the empirical growth models. I begin with the Solow and AK models informed by neoclassical theory. I demonstrate that both models do not make an explicit distinction between capital accumulation and technological progress. They just lump together the physical and human capital. Then I discuss the Schumpeterian growth models with creative destruction and institutions (particularly democracy as a meta-institution). I demonstrate that the Schumpeterian models can address a wider range of questions – particularly those that cannot be addressed satisfactorily by neoclassical models. I conclude by arguing for innovations in growth modeling – particularly for innovations that involve explicit incorporation of product-market competition and non-linearities in the relationship between innovation and growth.
    Keywords: Endogenous growth; Capital accumulation; Technological progress; Growth models; Innovation
    Date: 2016–02
  11. By: Xinshen Diao; Margaret McMillan; Dani Rodrik
    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.
    JEL: O1 O11 O4
    Date: 2017–02
  12. By: Joshua C. Hall (West Virginia University, Department of Economics); Serkan Karadas (Sewanee, The University of the South, Department of Economics); Minh Tam T. Schlosky (Sewanee, The University of the South, Department of Economics)
    Abstract: The impacts of various economic and institutional factors transcend the borders of a nation and flow over to adjacent countries. Past research has found that there are spatial spillovers in economic growth, development of institutions, governance quality and institutional quality. This paper conducts a study on the direct and indirect effects of debt relief from the Heavily Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI) programs. The IMF and the World Bank provide debt relief to the member countries that have passed the Decision Point of the HIPC Process. Using the Spatial Durbin Model (SDM) model, this study shows that there are negative spatial spillovers of the impacts of being a HIPC member on neighboring countries.
    Keywords: foreign aid, debt relief, HIPC, spatial spillovers, SDM model, SLX model
    JEL: F34 F35 C31
    Date: 2016–12

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