nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒04‒16
nine papers chosen by
Marc Klemp
Brown University

  1. Public Goods and Ethnic Diversity: Evidence from Deforestation in Indonesia By Alberto Alesina; Caterina Gennaioli; Stefania Lovo
  2. Institutional Transplant and Cultural Proximity: Evidence from Nineteenth-Century Prussia By Giampaolo Lecce; Laura Ogliari
  3. Tribalism and Government Effectiveness By Asongu, Simplice; Kodila-Tedika, Oasis
  4. Multiculturalism and Growth: Skill-Specific Evidence from the Post-World War II Period By Frédéric Docquier; Riccardo Turati; Jérome Valette; Chrysovalantis Vasilakis
  5. Creative Destruction vs Destructive Destruction ? : A Schumpeterian Approach for Adaptation and Mitigation By Can Askan Mavi
  6. How much does military spending affect growth? Causal estimates from the World's non-rich countries By Giorgio d'Agostino; John Paul Dunne; Luca Pieroni
  7. Optimal Growth with Resource Exhaustibility and Pollution Externality By Wei Jin; Alan Woodland
  8. A Review of the Recent Literature on the Institutional Economics Analysis of the Long-Run Performance of Nations By Peter Lloyd; Cassey Lee
  9. Revisiting the Link between Trade, Growth and Inequality; Lessons for Latin America and the Caribbean By Kimberly Beaton; Aliona Cebotari; Andras Komaromi

  1. By: Alberto Alesina; Caterina Gennaioli; Stefania Lovo
    Abstract: This paper shows that the level of deforestation in Indonesia is positively related to the degree of ethnic fractionalization at the district level. To identify a casual relation we exploit the exogenous timing of variations in the level of ethnic heterogeneity due to the creation of new jurisdictions. We provide evidence consistent with a lower control of politicians, through electoral punishment, in more ethnically fragmented districts. Our results bring a new perspective on the political economy of deforestation. They are consistent with the literature on (under) provision of public goods and social capital in ethnically diverse societies and suggest that when the underlying communities are ethnically fractionalized decentralisation can reduce deforestation by delegating powers to more homogeneous communities.
    Keywords: Deforestation, Ethnic Diversity, Corruption, Indonesia.
    JEL: D73 H0 L73
    Date: 2016–12
  2. By: Giampaolo Lecce; Laura Ogliari
    Abstract: The economic impact of exported institutions depends on the underlying cultural environment of the receiving country. We present evidence that cultural proximity between the exporting and the receiving country positively affects the adoption of new institutions and the resulting long-term economic outcomes. We obtain this result by combining new information on pre-Napoleonic kingdoms with county-level census data from nineteenthcentury Prussia. This environment allows us to exploit a quasi-natural experiment generated by radical Napoleonic institutional reforms and deeply rooted cultural heterogeneity across Prussian counties. We show that counties that are culturally more similar to France, in terms of either religious affiliation or historical exposure to French culture, display better long-term economic performance. We analyze a range of alternative explanations and suggest that our findings are most easily explained by cultural proximity facilitating the adoption of new institutions. Keywords: Institutions, Institutional Transplants, Culture, Economic Growth JEL classification: N13, N43, O47, Z10, Z12
    Date: 2017
  3. By: Asongu, Simplice; Kodila-Tedika, Oasis
    Abstract: This study assesses the relationship between tribalism (the tribalism index) and government effectiveness (per the World Bank) in 60 countries using cross-sectional data. This study finds that countries with high tribal populations generally enjoy bad governance in terms of government ineffectiveness. Government ineffectiveness and tribalism are found to mutually reinforce each other in a robust relationship.
    Keywords: Institutions, Tribalism, Government effectiveness
    JEL: D02 D73 I20 O55
    Date: 2016–03
  4. By: Frédéric Docquier (IRES - Institut de recherche économique et sociale - Université catholique de Louvain); Riccardo Turati (IRES - Institut de recherche économique et sociale - Université catholique de Louvain); Jérome Valette (CERDI - Centre d'études et de recherches sur le developpement international - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique); Chrysovalantis Vasilakis (IRES - Institut de recherche économique et sociale - Université catholique de Louvain)
    Abstract: This paper empirically revisits the impact of multiculturalism (as proxied by indices of birthplace diversity and polarization among immigrants, or by epidemiological terms) on the macroeconomic performance of US states over the 1960-2010 period. We test for skill-specific effects of multiculturalism, controlling for standard growth regressors and a variety of fixed effects, and accounting for the age of entry and legal status of immigrants. To identify causation, we compare various instrumentation strategies used in the existing literature. We provide converging and robust evidence of a positive and significant effect of diversity among college-educated immigrants on GDP per capita. Overall, a 10% increase in high-skilled diversity raises GDP per capita by 6.2%. On the contrary, diversity among less educated immigrants has insignificant effects. Also, we find no evidence of a quadratic effect or a contamination by economic conditions in poor countries.
    Keywords: Growth.,Immigration,Culture,Birthplace diversity
    Date: 2017–01–03
  5. By: Can Askan Mavi (PSE - Paris School of Economics)
    Abstract: This article aims to show how a market exposed to catastrophic events finds the equilibrium level of adaptation and mitigation policies through R&D policy, with respect to different levels of Poisson probability of catastrophe. We study the effect of pollution tax on long-run growth rate and the implications of catastrophe probability on this effect. Our results suggest that economy increases its R&D level with a higher catastrophe probability only if penalty rate due to an abrupt event is sufficiently high. We also show that pollution tax could increase the long-run growth. Besides, the catastrophe probability increases the amplitude of this positive effect if penalty rate is high enough. The market makes adaptation much more than mitigation with a higher catastrophe probability if total productivity of R&D is higher than cleanliness of innovations for intermediate goods. Lastly, we show that pollution growth could be higher with less polluting inputs, which we call a Jevons type paradox.
    Keywords: Adaptation, Occurence Hazard, Endogenous Technological Change,Abrupt damage,Mitigation
    Date: 2017–02–03
  6. By: Giorgio d'Agostino; John Paul Dunne (School of Economics and SALDRU, University of Cape Town); Luca Pieroni
    Abstract: While not always a concern for the general economic growth literature, the debate over the effects of military spending on growth continues to develop, with no consensus, but a deepening understanding of the limitations of previous work. One important issue that has not been adequately dealt with, is the endogeneity of military spending in the growth equation, mainly because of the difficulty of finding any variables that would make adequate instruments. This paper considers this issue, using an endogenous growth model estimated on a large sample of 109 non-high income countries for the period 1998-2012. The empirical analysis is framed within an instrumental variable setting that exploits the increase in military spending that occurs when unrest in a country escalates to turmoil. The estimation results show that endogeneity arising from reverse causality is a crucial issue, with the instrumental variable estimates providing a larger significant negative effect of military spending on growth than OLS would. This result is found to be robust to different sources of heterogeneity and different time periods.
    Keywords: Military spending, economic growth, reverse causality, instrumental variable, panel data.
    JEL: H00 O40 C26 C33
    Date: 2016
  7. By: Wei Jin (School of Economics, UNSW Business School, UNSW); Alan Woodland (School of Economics, UNSW Business School, UNSW)
    Abstract: This paper investigates a problem of optimal growth with resource exhaustibility and pollution externality, based on a unified framework that explicitly considers augmentable man-made capital, exhaustible resource reserves, and accumulative environmental pollutants as three stock variables for optimal control analysis. Characterizations of the social optimum show that for any given man-made capital and resource reserves, resource extraction flows generated in optimal growth with both resource exhaustibility and pollution externality are smaller than those with only resource exhaustibility, and taking account of pollution externality resulting from resource extraction reduces the growth rate of consumption if man-made capital and natural resources are complements in final goods production. Existence, uniqueness and comparative statics of the steady state are analyzed. Conditions for transitional dynamics stability of optimal growth with resource exhaustibility and pollution externality are established. Expositions are made on whether allocations in a market equilibrium are consistent with the social optimum outcomes.
    Keywords: Sustainability; Economic Growth; Exhaustible Resources; Pollution Externality; Environmental Damage; Optimal Control Problems.
    JEL: Q54 H23 Q43 Q32 O13 O44 C61
    Date: 2017–03
  8. By: Peter Lloyd (University of Melbourne); Cassey Lee (ISEAS – Yusof Ishak Institute, Singapore)
    Abstract: This paper reviews the recent (post-2000) literature which assesses the importance of institutions as a factor determining cross-country differences in growth rates or in the contemporary level of “prosperity”. It first sketches how institutional economics has evolved. It then examines critically the methods of analysis employed in the recent literature. The paper finds that this literature has made a major contribution to the analysis of the causes of economic growth but the relative importance of institutions as a determinant of long-run growth and prosperity is still a wide open question.
    Keywords: institutions, policies, long-run performance, instruments
    JEL: O43 B52
    Date: 2016–01
  9. By: Kimberly Beaton; Aliona Cebotari; Andras Komaromi
    Abstract: We revisit the relationship between international trade, economic growth and inequality with a focus on Latin America and the Caribbean. The paper combines two approaches: First, we employ a cross-country panel framework to analyze the macroeconomic effects of international trade on economic growth and inequality considering the strength of trade connections as well as characteristics of countries’ export markets and products. Second, we consider event studies of past episodes of trade liberalization to extract general lessons on the impact of trade liberalization on economic growth and its structure and inequality. Both approaches consistently point to two broad messages: First, trade openness and connectivity to the center of the trade network has substantial macroeconomic benefits. Second, we do not find a statistically significant or economically sizable direct impact of trade on overall income inequality.
    Keywords: Trade;Globalization;Growth, Liberalization, Inequality, Latin America, Caribbean, Economic Growth of Open Economies, Globalization: General, General, Economic Growth of Open Economies, Globalization: General
    Date: 2017–03–09

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