nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒03‒26
twelve papers chosen by
Marc Klemp
Brown University

  1. "Capital-Skill Complementarity and the Emergence of Labor Emancipation" By Quamrul H. Ashraf; Francesco Cinnirella; Oded Galor; Boris Gershman; Erik Hornung
  2. Physiological constraints and comparative economic development By Dalgaard, Carl-Johan; Strulik, Holger
  3. Automation and demographic change By Abeliansky, Ana; Prettner, Klaus
  4. The lost race against the machine: Automation, education and inequality in an R&D-based growth model By Prettner, Klaus; Strulik, Holger
  5. Entrepreneurship and growth: lessons from an intellectual journey By Philippe Aghion
  6. "Just Do Your Job": Obedience, Routine Tasks, and the Pattern of Specialization By Filipe R. Campante; Davin Chor
  7. On the possibility of automation-induced stagnation By Gasteiger, Emanuel; Prettner, Klaus
  8. Effects of Institutions and Natural Resources in a Multiple Growth Regime By Yacine Belarbi; Lylia Sami; Said Souam
  9. Growth, Income Distribution, and the ‘Entrepreneurial State’ By Daniele Tavani; Luca Zamparelli
  10. Growth of the Service Sector and Policies toward Service Industries: A historical overview of the past century (Japanese) By MORIKAWA Masayuki
  11. A Pasinetti model of savings and growth By Donald George
  12. Inflation and Economic Growth in a Schumpeterian Model with Endogenous Entry of Heterogeneous Firms By Chu, Angus C.; Cozzi, Guido; Furukawa, Yuichi; Liao, Chih-Hsing

  1. By: Quamrul H. Ashraf; Francesco Cinnirella; Oded Galor; Boris Gershman; Erik Hornung
    Abstract: This paper advances a novel hypothesis regarding the historical roots of labor emancipation. It argues that the decline of coercive labor institutions in the industrial phase of development has been an inevitable by-product of the intensification of capital-skill complementarity in the production process. In light of the growing significance of skilled labor for fostering the return to physical capital, elites in society were induced to relinquish their historically profitable coercion of labor in favor of employing free skilled workers, thereby incentivizing the masses to engage in broad-based human capital acquisition, without fear of losing their skill premium to expropriation. In line with the proposed hypothesis, exploiting a plausibly exogenous source of variation in early industrialization across regions of nineteenth-century Prussia, capital abundance is shown to have contributed to the subsequent intensity of de facto serf emancipation.
    Date: 2017
  2. By: Dalgaard, Carl-Johan; Strulik, Holger
    Abstract: It is a well known fact that economic development and distance to the equator are positively correlated variables in the world today. It is perhaps less well known that as recently as 1500 C.E. it was the other way around. The present paper provides a theory of why the 'latitude gradient' seemingly changed sign in the course of the last half millennium. In particular, we develop a dynamic model of economic and physiological development in which households decide upon the number and nutrition of their offspring. In this setting we demonstrate that relatively high metabolic costs of fertility, which may have emerged due to positive selection towards greater cold tolerance in locations away from the equator, would work to stifle economic development during pre-industrial times, yet allow for an early onset of sustained growth. As a result, the theory suggests a reversal of fortune whereby economic activity gradually shifts away from the equator in the process of long-term economic development.
    Keywords: long-run growth,evolution,nutrition,fertility,education,comparative development
    JEL: O11 I12 J13
    Date: 2017
  3. By: Abeliansky, Ana; Prettner, Klaus
    Abstract: We analyze the effects of declining population growth on the adoption of automation technology. A standard theoretical framework of the accumulation of traditional physical capital and of automation capital predicts that countries with a lower population growth rate are the ones that innovate and/or adopt new automation technologies faster. We test the theoretical prediction by means of panel data for 60 countries over the time span from 1993 to 2013. Regression estimates provide empirical support for the theoretical prediction and suggest that a 1% increase in population growth is associated with approximately a 2% reduction in the growth rate of robot density. Our results are robust to the inclusion of standard control variables, the use of different estimation methods, the consideration of a dynamic framework with the lagged dependent variable as regressor, and changing the measurement of the stock of robots.
    Keywords: Automation,Industrial Robots,Demographic Change,Declining Population Growth,Economic Growth
    JEL: J11 O14 O33 O40
    Date: 2017
  4. By: Prettner, Klaus; Strulik, Holger
    Abstract: We analyze the effect of automation on economic growth and inequality in an R&D-based growth model with two types of labor: highskilled labor that is complementary to machines and low-skilled labor that is a substitute for machines. The model predicts that innovationdriven growth leads to increasing automation, an increasing skill premium, an increasing population share of graduates, increasing income and wealth inequality, a declining labor share, and (in an extension of the basic model) increasing unemployment. In contrast to Piketty's famous claim that faster economic growth reduces inequality, our theory predicts that faster economic growth promotes inequality.
    Keywords: Automation,R&D-Based Growth,Inequality,Wealth Concentration
    JEL: E23 E25 O31 O33 O40
    Date: 2017
  5. By: Philippe Aghion
    Abstract: This lecture is the story of an intellectual journey, that of elaborating a new—Schumpeterian—theory of economic growth. A theory where (i) growth is generated by innovative entrepreneurs; (ii) entrepreneurial investments respond to incentives that are themselves shaped by economic policies and institutions; (iii) new innovations replace old technologies: in other words, growth involves creative destruction and therefore involves a permanent conflict between incumbents and new entrants. First, we motivate and then lay out the Schumpeterian paradigm and point to a set of empirical predictions which distinguish this paradigm from other growth models. Second, we raise four debates on which the Schumpeterian approach sheds new light: the middle income trap, secular stagnation, the recent rise in top income inequality, and firm dynamics. Third and last, we show how the paradigm can be used to think (or rethink) about growth policy design. (This article is based on the author’s presentation at the Global Award for Entrepreneurship Research ceremony in Stockholm, Sweden, May 10, 2016.)
    Keywords: entrepreneurship; creative destruction; R&D; entry; exit; competition; technology frontier; firm dynamics
    JEL: O10 O11 O12 O30 O31 O33 O4 O47
    Date: 2017–01
  6. By: Filipe R. Campante; Davin Chor (National University of Singapore)
    Abstract: We study the interplay between cultural attitudes and the economic environment, focusing on attitudes towards obedience in the workplace. We establish two key stylized facts: First, at the country level, an upward shift in workplace obedience over time is associated with more exporting in industries that feature a high routine task content ('Specialization Fact'). Second, at the individual level, the degree of \export-routineness" in the economic environment that respondents were exposed to in their formative years -but not in their adult years -shapes the pro-obedience attitudes that they carry with them into the workforce ('Obedience Fact'). Together, these two facts show that cultural attitudes on workplace obedience respond systematically to economic incentives, and that such a culture in turn shapes the subsequent pattern of industry specialization. We develop an overlapping generations model of human capital investment and cultural transmission, to understand how this aspect of culture and specialization patterns in the economy are jointly determined in the long run. In particular, the model demonstrates the possibility of an "obedience trap": countries may specialize in routine sectors (e.g., basic manufacturing) that foster a culture of obedience, at the expense of the development of more nonroutine and potentially more productive activities.
    Keywords: Culture, Workplace Obedience, Routine Tasks, Education, Human capital, Specialization Patterns, Exports
    Date: 2017–03
  7. By: Gasteiger, Emanuel; Prettner, Klaus
    Abstract: We analyze the long-run growth effects of automation in the standard overlap- ping generations framework. We show that, in contrast to other neoclassical models of capital accumulation, automation does not promote growth but induces economic stagnation. The reason is that automation suppresses wages, which are the only source of investment in the overlapping generations framework.
    Keywords: automation,robots,investment,stagnation,economic growth,overlapping generations model
    JEL: J10 J20 O14 O33 O41
    Date: 2017
  8. By: Yacine Belarbi (Centre de recherche en économie appliquée pour le développement (CREAD)); Lylia Sami; Said Souam
    Abstract: The dependence to natural resource is currently the object of a wide debate in the analysis of economic growth in rentier states. In this work, we examine the interaction effect between oil resources dependence and the quality of institutions on economic growth by employing a panel threshold regression methodology. Our results show that the effect of oil resource dependence on economic growth becomes positive, as the quality of institutions improves. In other side, contrary to many precedent results in this area, an increase in oil dependence wipes out the positive effect of institutional quality on growth. Indeed, a positive variation of the institution quality doesn’t necessary lead to a positive variation in economic growth.
    Date: 2015–04
  9. By: Daniele Tavani (Department of Economics, Colorado State University); Luca Zamparelli (Department of Social Sciences and Economics, Sapienza University of Rome)
    Abstract: In this paper, we introduce a twofold role for the public sector in the Goodwin (1967) model of the growth cycle. The government collects income taxes in order to: (a) invest in infrastructure capital, which directly affects the production possibilities of the economy; (b) finance publicly funded research and development (R&D), which augments the growth rate of labor productivity. We study two versions of the model: with and without induced technical change, that is with or without a feedback from the labor share to labor productivity growth. In both cases we show that: (i) provided that the output-elasticity of infrastructure is greater than the elasticity of labor productivity growth to public R&D, there exists a tax rate that maximizes the long-run labor share, and it is smaller than the growth-maximizing tax rate; (ii) the longrun share of labor is always increasing in the share of public spending in infrastructure; (iii) different taxation schemes have an impact on the stability of growth cycles.
    Keywords: Public R&D, Goodwin growth cycle, fiscal policy
    JEL: D33 E11 O38
    Date: 2017–03
  10. By: MORIKAWA Masayuki
    Abstract: This paper presents a historical overview of the growth of the service sector and policies toward the service industries from the 1920s to the present. Looking back since the early 20th century, the evolution of the industrial structure in Japan toward the service economy can be separated into three phases. In the first phase, from the 1920s to the early 1970s, the share of the service sector gradually increased in parallel with the growth of the manufacturing sector, with an interruption under the tightly controlled industrial activities during the wartime economy. In the second phase, from the early 1970s to the early 1990s, manufacturing share to gross domestic product (GDP) peaked out and the expansion of service sector accelerated. The third phase beginning from the "lost decade" is characterized as structural changes in the service sector stemming from the IT revolution, globalization, and deregulation. In principle, the change in the industrial structure in Japan is consistent with the pattern observed in major advanced countries. Although the service sector was unimportant as the target of industrial policy in the early stage of economic development, it has gradually attracted attention from policymakers. Change in the industrial structure toward the service economy has been closely linked with the development of socio-economic structure such as urbanization and female labor participation.
    Date: 2017–02
  11. By: Donald George
    Abstract: This paper develops a two-sector growth model in which institutional investors play a significant role. A necessary and sufficient condition is established under which these investors own the entire capital stock in the long run. The dependence of the long-run growth rate on the behaviour of such investors, and the effects of a productivity increase are analysed.
    JEL: O41 O43
    Date: 2017–02–06
  12. By: Chu, Angus C.; Cozzi, Guido; Furukawa, Yuichi; Liao, Chih-Hsing
    Abstract: This study develops a Schumpeterian growth model with endogenous entry of heterogeneous firms to analyze the effects of monetary policy on economic growth via a cash-in-advance constraint on R&D investment. Our results can be summarized as follows. In the special case of a zero entry cost, an increase in the nominal interest rate decreases R&D, the arrival rate of innovations and economic growth as in previous studies. However, in the general case of a positive entry cost, an increase in the nominal interest rate affects the distribution of innovations that are implemented and would have an inverted-U effect on economic growth if the entry cost is sufficiently large. We also calibrate the model to aggregate data of the US economy and find that the growth-maximizing inflation rate is about 3%, which is consistent with recent empirical estimates.
    Keywords: monetary policy, inflation, economic growth, heterogeneous firms
    JEL: E41 O3 O4
    Date: 2017–03

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