nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒05‒14
fifteen papers chosen by
Marc Klemp
Brown University

  1. Family organisation and human capital inequalities in historic Europe: testing the association anew By Mikołaj Szołtysek; Radoslaw Poniat; Sebastian Klüsener; Siegfried Gruber
  2. Japan and the Great Divergence, 730-1874 By Bassino, Jean-Pascal; Broadberry, Stephen N; Fukao, Kyoji; Gupta, Bishnupriya; Takashima, Masanori
  3. On the Joint Evolution of Culture and Institutions By Alberto Bisin; Thierry Verdier
  4. Automation and demographic change By Abeliansky, Ana; Prettner, Klaus
  5. Testing R&D-Based Endogenous Growth Models By Peter K. Kruse-Andersen
  6. China, Europe and the great Divergence: A Study in Historical National Accounting, 980-1850 By Broadberry, Stephen N; Guan, Hanhui; Li, David Daokui
  7. Reassessing Railroads and Growth: Accounting for Transport Network Endogeneity By Swisher IV, S. N.
  8. The origins of economic growth and regional income inequality in South-West Europe 1870-1950 By Tirado, Daniel A.; Sanchís Llopis, M. Teresa; Martínez-Galarraga, Julio; Díez Minguela, Alfonso
  9. Rent The Productivity of Nations By Oleg Badunenko; Daniel J. Henderson; Valentin Zelenyuk;
  10. Determinants of long-term economic growth redux: A Measurement Error Model Averaging (MEMA) approach By Doppelhofer, G.; Moe Hansen, O-P.; Weeks, M.
  11. The Government Expenditure Structure and Economic growth By Simona V?eti?ková
  12. Growth in the Shadows: Effect of the Shadow Economy on U.S. Economic Growth over More Than a Century By Goel, Rajeev K.; Saunoris, James W.; Schneider, Friedrich
  13. Economic Convergence, Capital Accumulation, and Income Traps: Empirical Evidence By Cyn-Young Park; Rogelio Mercado Jr.
  14. The CO2-Growth nexus revisited: A nonparametric analysis for G7 economies over nearly two centuries By Shahbaz, Muhammad; Shafiullah, Muhammad; Papavassiliou, Vassilios; Hammoudeh, Shawkat
  15. Top-end inequality and growth: Empirical evidence By Tuominen Elina

  1. By: Mikołaj Szołtysek (Max Planck Institute for Demographic Research, Rostock, Germany); Radoslaw Poniat; Sebastian Klüsener (Max Planck Institute for Demographic Research, Rostock, Germany); Siegfried Gruber (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: There has been growing interest in the question of whether variation in family systems is a factor in the disparities in growth, development, and human capital formation. Studies by proponents of the field of New Institutional Economics have suggested that differences in family organisation could have considerable influence on regional developmental inequalities in today’s world, while a number of economic historians have argued that certain systems of marriage and household structure in the European past might have been more conducive than others to economic growth. Despite recent criticism of these ideas by Dennison and Ogilvie, who argued that the family has no exogenous effects on growth, the debate over this potential relationship continues. However, we believe that this discussion has been suffering from a lack of historical data that would give a fuller picture of the rich diversity of family settings, and from methodological shortcomings that have so far hindered the proper operationalisation of historical family systems and their potential effects on developmental outcomes. In this paper, we apply a recently developed multidimensional measure of historic familial organisation, the Patriarchy Index; and use spatially sensitive multivariate analyses to investigate its relationship with human capital levels, as approximated by numeracy across 115 populations of historic Europe. We find a strong negative association between the Patriarchy Index and regional numeracy patterns that remains significant even after controlling for a broad range of other important factors. Our observation that family-driven age- and gender-related inequalities, as captured by the index, are relevant for understanding variation in basic numeracy patterns in the past suggests that there are indeed important links between family organisation and human capital accumulation that merit further investigation.
    Keywords: Europe, economic and social development, historical demography, patriarchy, spatial analysis
    JEL: J1 Z0
    Date: 2017–05
  2. By: Bassino, Jean-Pascal; Broadberry, Stephen N; Fukao, Kyoji; Gupta, Bishnupriya; Takashima, Masanori
    Abstract: Japanese GDP per capita grew at an annual rate of 0.08 per cent between 730 and 1874, but the growth was episodic, with the increase in per capita income concentrated in two periods, 1450-1600 and after 1721, interspersed with periods of stable per capita income. There is a similarity here with the growth pattern of Britain. The first countries to achieve modern economic growth at opposite ends of Eurasia thus shared the experience of an early end to growth reversals. However, Japan started at a lower level than Britain and grew more slowly until the Meiji Restoration.
    Date: 2017–04
  3. By: Alberto Bisin (New York University); Thierry Verdier (Paris School of Economics)
    Abstract: Explanations of economic growth and prosperity commonly identify a unique causal effect, e.g., institutions, culture, human capital, geography. In this paper we provide instead a theoretical modeling of the interaction between culture and institutions and their effects on economic activity. We characterize conditions on the socio-economic environment such that culture and institutions complement (resp. substitute) each other, giving rise to a multiplier effect which amplifies (resp. dampens) their combined ability to spur economic activity. We show how the joint dynamics of culture and institutions may display interesting non-ergodic behavior, hysteresis, oscillations, and comparative dynamics. Finally, in specific example societies, we study how culture and institutions interact to determine the sustainability of extractive societies as well as the formation of civic capital and of legal systems protecting property rights.
    Keywords: cultural transmission, evolution of institutions
    JEL: O10 P16 P48
    Date: 2017–05
  4. By: Abeliansky, Ana; Prettner, Klaus
    Abstract: We analyze the effects of declining population growth on automation. A simple theoretical model of capital accumulation predicts that countries with lower population growth introduce automation technologies earlier. We test the theoretical prediction on panel data for 60 countries over the time span 1993-2013. Regression estimates support the theoretical prediction, suggesting that a 1% increase in population growth is associated with an approximately 2% reduction in the growth rate of robot density. Our results are robust to the inclusion of standard control variables, different estimation methods, dynamic specifications, and changes to the measurement of the stock of robots.
    Keywords: automation,industrial robots,demographic change,population growth,declining labor force,economic growth
    JEL: J11 O14 O33 O40
    Date: 2017
  5. By: Peter K. Kruse-Andersen (Department of Economics, University of Copenhagen)
    Abstract: R&D-based growth models are tested using US data for the period 1953-2014. A general growth model is developed which nests the model varieties of interest. The model implies a cointegrating relationship between multifactor productivity, research intensity, and employment. This relationship is estimated using cointegrated VAR models. The results provide evidence against the widely used fully endogenous variety and in favor of the semi-endogenous variety. Forecasts based on the empirical estimates suggest that the slowdown in US productivity growth will continue. Particularly, the annual long-run growth rate of GDP per worker converges to between zero and 1.1 pct.
    Keywords: Endogenous growth, semi-endogenous growth, total factor productivity (TFP), research and development (R&D), time series econometrics, cointegration
    JEL: C32 E24 O31 O41 O47 O51
    Date: 2017–04–06
  6. By: Broadberry, Stephen N; Guan, Hanhui; Li, David Daokui
    Abstract: Chinese GDP per capita fluctuated at a high level during the Northern Song and Ming dynasties before trending downwards during the Qing dynasty. China led the world in living standards during the Northern Song dynasty, but had fallen behind Italy by 1300. At this stage, it is possible that parts of China were still on a par with the richest parts of Europe, but by 1750 the gap was too large to be bridged by regional variation within China and the Great Divergence had already begun before the Industrial Revolution
    Date: 2017–04
  7. By: Swisher IV, S. N.
    Abstract: Motivated by the seminal work of Robert Fogel on U.S. railroads, I reformulate Fogel’s original counter- factual history question on 19th century U.S. economic growth without railroads by treating the transport network as an endogenous equilibrium object. I quantify the effect of the railroad on U.S. growth from its introduction in 1830 to 1861. Specifically, I estimate the output loss in a counterfactual world with- out the technology to build railroads, but retaining the ability to construct the next-best alternative of canals. My main contribution is to endogenize the counterfactual canal network through a decentralized network formation game played by profit-maximizing transport firms. I perform a similar exercise in a world without canals. My counterfactual differs from Fogel’s in three main ways: I develop a structural model of transport link costs that takes heterogeneity in geography into account to determine the cost of unobserved links, the output distribution is determined in the model as a function of transport costs, and the transport network is endogenized as a stable result of a particular network formation game. I find that railroads and canals are strategic complements, not strategic substitutes. Therefore, the output loss can be quite acute when one or the other is missing from the economy. In the set of Nash stable networks, relative to the factual world, the median value of output is 45% lower in the canals only counterfactual and 49% lower in the railroads only counterfactual. With only one of the transportation technologies available, inequality in output across cities would have been lower in variance terms but sharply higher in terms of the maximum-minimum gap. Such a stark output loss is due to two main mechanisms: inefficiency of the decentralized equilibrium due to network externalities and complementarities due to spatial heterogeneity in costs across the two transport modes.
    Keywords: Economic growth, transport infrastructure, network formation games, strategic comple- ments, railroads, counterfactual history, multiple equilibria, computation, simulation
    JEL: E22 O11 N71 L92 R42
    Date: 2017–04–28
  8. By: Tirado, Daniel A.; Sanchís Llopis, M. Teresa; Martínez-Galarraga, Julio; Díez Minguela, Alfonso
    Abstract: This study focuses on South-West Europe, an area comprising France, Italy, Spain and Portugal, to evaluate inequality in regional income between 1870 and 1950. To do this, information on a decadal basis on regional population and Gross Domestic Product (GDP) for 171 regions (84 French départements, 22 Italian regioni, 18 Portuguese distritos and 49 Spanish provincias) has been collected. Regional inequalities increased between 1870 and 1910 but subsequently tended to flatten out through until 1950. In the first period, regional disparities increased mainly driven by a handful of French and Spanish regions in northern France, such as the Paris basin, Catalonia, the Basque-Country and northern Italy. In the second period, inequality flattened out, driven by the incorporation of new regions on the path of modern economic growth. The study also shows the evolution towards a bimodal, polarized pattern of regional income distribution in 1910-1950 with two convergence clubs. The richest regions were clustering in northern France, the Paris basin and the north of Italy. Meanwhile, most of southern Italy and the vast majority of the Spanish and Portuguese regions already occupied the bottom positions in the income distribution ranking. This point to the emergence of the core-periphery pattern that characterizes much of South-West Europe today.
    Keywords: Portugal; Italy; Spain; France; Regional inequality; Economic History
    JEL: R11 O18 N94 N93
    Date: 2017–05
  9. By: Oleg Badunenko (Portsmouth Business School); Daniel J. Henderson (University of Alabama, Tuscaloosa); Valentin Zelenyuk (University of Queensland);
    Abstract: This paper scrutinizes research on the productivity of nations with a particular focus on the preceding 50 years. First, we briefly synopsize ‘classic’ studies on economic growth and convergence of nations. The main criticism of these studies is that they did not account for potential inefficiency of countries. The production frontier literature attempts to deal with this issue and we give a brief introduction to it with a focus on data envelopment analysis. One central point of this review is the analysis of sources of productivity growth before and after 1990, a period of time, which appears to be a point of a structural change in growth patterns around the world. The second thread of this paper concerns the forces behind the transformation of the worldwide productivity distribution from a uni-modal to a bimodal distribution during the 1990s. Finally, we emphasize caveats and outline possible directions for future research.
    Keywords: Convergence, Bi-modality, Catching up, Data Envelopment Analysis, Efficiency, Economic Growth, Human capital, Income Distribution, Penn World Tables, Physical capital, Productivity, Stochastic Frontier Analysis, Technology, TFP
    JEL: D24 C14 C43 O47
    Date: 2017–05–03
  10. By: Doppelhofer, G.; Moe Hansen, O-P.; Weeks, M.
    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. In addition, 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: 2017–01–09
  11. By: Simona V?eti?ková (University of Economics, Faculty of Economics, Department of Economics, Prague)
    Abstract: This article examines the effect of the government expenditure structure on the economic growth. The objective is to determine which components of public expenditures are growth enhancing and which growth retarding. The theoretical model is set into the endogenous growth framework and describes the growth mechanism of productive and unproductive government expenditures. The growth impact of public spending composition is analysed for 18 European countries from 1996 to 2012. The empirical part is based on the panel data analysis. The empirical findings suggest that reallocating public resources towards education and health can promote growth. On the contrary higher expenditures on social spending and defence are likely to be growth-retarding.
    Keywords: Government expenditure, Economic growth, Endogenous growth theory
    JEL: E62 H10 H50
    Date: 2017–04
  12. By: Goel, Rajeev K. (Illinois State University); Saunoris, James W. (Eastern Michigan University); Schneider, Friedrich (University of Linz)
    Abstract: This paper provides a long-term view by studying the effect of the underground or shadow economy on economic growth in the Unites States over the period 1870 to 2014. Shadow activities might spur or retard economic growth depending on their interactions with the formal sector and impacts on the provision of public goods. Nesting the analysis in a standard neo-classical growth model, we use a relatively new time-series technique to estimate the short-run dynamics and long-run relationship between economic growth and its determinants. Results suggest that prior to WWII the shadow economy had a negative effect on economic growth; however, post-WWII the shadow economy was beneficial for growth. This ambiguity regarding the overall growth impact of the shadow economy is consistent with underlying theoretical arguments.
    Keywords: economic growth, shadow economy, United States, time series
    JEL: E26 O43 O51 K42
    Date: 2017–04
  13. By: Cyn-Young Park (Ecoonomics Research and Regional Cooperation, Asian Development Bank); Rogelio Mercado Jr. (Newcastle Business School, Northumbria University)
    Abstract: This paper aims to examine the factors that increase the likelihood of economic transition to higher income status; that is, it tries to answer the question of why some economies move to a higher income country group while others do not. Using a quintile income distribution approach, we identify 62 economies that moved to a higher quintile income group from 1960 to the 2010s out of a sample of 182 economies. Our findings show that higher physical and human capital growth and oil revenues are significantly associated with a greater probability of transitioning to higher quintile income group, although their effects vary not only across income groups within a sample period but also across different periods. Our results indicate that economies that have attained substantial capital accumulation (either physical or human, or combination thereof) and/or are blessed with oil resources have avoided income traps and demonstrated a successful and often steady transition to higher income groups.
    Keywords: economic convergence, capital accumulation, middle-income trap
    JEL: O10 O11 O40
    Date: 2017–05
  14. By: Shahbaz, Muhammad; Shafiullah, Muhammad; Papavassiliou, Vassilios; Hammoudeh, Shawkat
    Abstract: Using a two-century long dataset and some recently popularized nonparametric econometric techniques, this study revisits the nexus between economic growth and carbon dioxide (CO2) emissions for the G7 countries over nearly two centuries. The use of nonparametric modelling is warranted by the fact that long historical time series are often subject to structural breaks and other forms of nonlinearity over the course of time. We employ nonparametric cointegration and causality tests along with the cross-validated Local Linear technique analysis and validate the existence of the environmental Kuznets curve in six of the G7 countries – Canada, France, Germany, Italy, U.K. and the U.S.– and the only exception is Japan. Our empirical analysis also finds CO2 emissions and economic growth to be cointegrated and closely interrelated in the Granger sense. Our results are robust and highlight the nonlinear causal relationship between the two variables.
    Keywords: G7 Countries, Economic Growth, CO2 Emissions, EKC Hypothesis, Nonparametric Econometrics.
    JEL: A1
    Date: 2017–05–03
  15. By: Tuominen Elina (School of Management, University of Tampere)
    Abstract: New series of the top 1% income shares in 23 countries are used to investigate the relationship between top-end inequality and subsequent economic growth from the 1920s to the 2000s. The association is studied using different time-period specifications, with a focus on data averaged over 5- and 10-year periods. To address the issue related to chosen functional forms, penalized spline methods are exploited to allow for nonlinearities. Empirical evidence suggests that the association between top-end inequality and growth can be linked to the level of economic development. The main findings relate to currently "advanced" countries: the results show a negative relationship between top-end inequality and subsequent growth in many settings, but the findings also suggest that this association may become weaker in the course of economic development. “Lessadvanced” countries need to be studied further when more data become available.
    Keywords: top incomes, growth, nonlinearity, longitudinal data
    Date: 2016–09

This nep-gro issue is ©2017 by Marc Klemp. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.