nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒03‒05
eight papers chosen by
Marc Klemp
Brown University

  1. The Macrogenoeconomics of Comparative Development By Quamrul H. Ashraf; Oded Galor
  2. Technology-Skill Complementarity in Early Phases of Industrialization By Raphaël Franck; Oded Galor
  3. Agricultural Diversity, Structural Change and Long-run Development: Evidence from the U.S. By Martin Fiszbein
  4. Democracy and Growth: Evidence of a new measurement By Krieger, Tommy; Gründler, Klaus
  5. Entrepreneurship and Institutions: A Bidirectional Relationship By Elert, Niklas; Henrekson, Magnus
  6. Factor Income Distribution and Endogenous Economic Growth - When Piketty meets Romer - By Irmen, Andreas; Tabakovic, Amer
  7. The Drivers of Economic Growth in China and India: Globalization or Financial Development? By Shahbaz, Muhammad; Kandil, Magda; Kumar, Mantu; Nguyen, Duc Khuong
  8. Openness and Growth: Is the Relationship Non-Linear? By Rangan Gupta; Lardo Stander; Andrea Vaona

  1. By: Quamrul H. Ashraf; Oded Galor
    Abstract: The importance of evolutionary forces for comparative economic performance across societies has been the focus of a vibrant literature, highlighting the roles played by the Neolithic Revolution and the prehistoric “out of Africa” migration of anatomically modern humans in generating worldwide variations in the composition of human traits. This essay surveys this literature and examines the contribution of a recent hypothesis regarding the evolutionary origins of comparative economic development, set forth in Nicholas Wade’s A Troublesome Inheritance: Genes, Race and Human History , to this important line of research.
    JEL: N10 N30 O11 Z10
    Date: 2017–02
  2. By: Raphaël Franck; Oded Galor
    Abstract: The research explores the effect of industrialization on human capital formation. Exploiting exogenous regional variations in the adoption of steam engines across France, the study establishes that, in contrast to conventional wisdom that views early industrialization as a predominantly deskilling process, the industrial revolution was conducive for human capital formation, generating wide-ranging gains in literacy rates and educational attainment.
    JEL: N33 N34 O14 O33
    Date: 2017–02
  3. By: Martin Fiszbein
    Abstract: This paper examines the role of agricultural diversity in the process of development. Using data from U.S. counties and exploiting climate-induced variation in agricultural production patterns, I show that mid-19th century agricultural diversity had positive long-run effects on population density and income per capita. Examining the effects on development outcomes over time, I find that early agricultural diversity fostered structural change during the Second Industrial Revolution. Besides stimulating industrialization, agricultural diversity boosted manufacturing diversification, patent activity, and new labor skills, as well as knowledge- and skill-intensive industries. These results are consistent with the hypothesis that diversity spurs the acquisition of new ideas and new skills because of the presence of cross-sector spillovers and complementarities.
    JEL: N11 N12 N51 O13 O14
    Date: 2017–02
  4. By: Krieger, Tommy; Gründler, Klaus
    Abstract: We present a novel approach for measuring democracy based on Support Vector Machines, a mathematical algorithm for pattern recognition. The Support Vector Machines Democracy Index (SVMDI) is continuous on the 0-1-interval and enables very detailed and sensitive measurement of democracy for 185 countries in the period between 1981 and 2011. Application of the SVMDI highlights a robust positive relationship between democracy and economic growth. We argue that the ambiguity in recent studies mainly originates from the lack of sensitivity of traditional democracy indicators. Analyzing transmission channels through which democracy exerts its influence on growth, we conclude that democratic countries have better educated populations, higher investment shares, and lower fertility rates, but not necessarily higher levels of redistribution.
    JEL: P16 O11 C43
    Date: 2016
  5. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: The interplay between entrepreneurship and institutions is crucial for economic development; however, the view that institutions determine the extent to which entrepreneurial activity is productive is only part of the story. We argue that causality is bidirectional, in that entrepreneurship is also, for better or for worse, one of the main drivers of institutional change. Through their actions, entrepreneurs have a fundamental influence on institutions, whether they abide by them, actively try to alter them, or evade them. Particular attention is given to evasive entrepreneurship, an entrepreneurial function which, until recently, has been an underappreciated and poorly understood source of innovation and institutional change. We argue that the influence of evasive entrepreneurship on the economic trajectories of societies is likely to only grow in the future.
    Keywords: Economic development; Entrepreneurship; Evasive entrepreneurship; Innovation; Institutional change; Regulation
    JEL: L50 M13 O31 P14
    Date: 2017–02–16
  6. By: Irmen, Andreas; Tabakovic, Amer
    Abstract: We scrutinize Thomas Piketty’s (2014) theory concerning the relationship between an economy’s long-run growth rate, its capital-income ratio, and its factor income distribution put forth in his recent book Capital in the Twenty-First Century. We find that a smaller long-run growth rate may be associated with a smaller capital-income ratio. Hence, Piketty’s Second Fundamental Law of Capitalism does not hold. However, in line with Piketty’s theory a smaller long-run growth rate goes together with a greater capital share. These findings obtain in variants of Romer’s (1990) seminal model of endogenous technological change. Here, both the economy’s savings rate and its growth rate are endogenous variables whereas in Piketty’s theory they are both exogenous parameters.
    JEL: E10 O33 E25
    Date: 2016
  7. By: Shahbaz, Muhammad; Kandil, Magda; Kumar, Mantu; Nguyen, Duc Khuong
    Abstract: Using annual data from 1970-2013 for China and India, this study examines the impact of globalization and financial development on economic growth by endogenizing capital and inflation and drawing comparisons between the two fastest growing emerging market economies. In the long-run, co-integration test results indicate that financial development increases economic growth in China and India. The results also reveal that globalization accelerates economic growth in India but, surprisingly, impairs economic growth in China as it increases competition for exports. The results furthermore disclose that acceleration in capitalization and inflation, as a proxy for aggregate demand, are positively linked to economic growth in China and India. Causality test results indicate that both financial development and economic growth are interdependent. In contrast, causality runs from higher economic growth to increased globalization in India, while the results do not support long-term causality between globalization and economic growth in China.
    Keywords: Economic Growth, Globalization, Financial Development, China, India
    JEL: A1
    Date: 2017–02–02
  8. By: Rangan Gupta (Department of Economics, University of Pretoria, South Africa); Lardo Stander (Department of Economics, University of Pretoria, South Africa); Andrea Vaona (Department of Economics, University of Verona, Italy and Kiel Institute for the World Economy, Germany)
    Abstract: Using a novel, augmented two–sector endogenous growth model appropriate for a small, open economy characterised by human capital accumulation and productive government expenditure, we analyse the nature of the relationship between openness and economic growth. In the augmented form, external openness enters the human capital accumulation function directly. Productive government expenditure also affects human capital accumulation, but relies on seigniorage revenue to finance the productive expenditure where seigniorage revenue is itself dependent on the level of openness. Specifically, the findings indicate two, opposing effects of openness on growth – a direct effect of openness on growth through the knowledge spillovers that affect human capital accumulation, and an indirect effect of decreasing seigniorage revenue on growth through decreasing productive government expenditure on human capital. We discuss conditions under which the resultant openness–growth curve can be concave or convex, but do not specify theoretical functional forms or values to unknown parameters in the model to provide a concise theoretical result. Rather, drawing samples of exact model–match countries over a sample period of 1980–2011, we rely on a semi–parametric, data–driven empirical approach augmented with a restricted cubic spline regression function to provide empirical impetus to the theoretical outcomes reported. We show that the relationship between openness and growth is non–linear and specifically, inverted U–shaped. The result suggests that openness can only have a positive impact on the growth-rate until a certain threshold–level, beyond which, the effect is negative.
    Keywords: Openness, seigniorage, knowledge spillovers, semi–parametric estimation, spline regression
    JEL: C14 C61 E21 O42
    Date: 2017–01

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