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on Economic Growth |
| By: | Jonathan J Adams (Department of Economics, University of Florida) |
| Abstract: | For a thousand years, income growth was associated with a rising military employment share. But this share peaked in the early 20th century, after which military employment shares fell with income growth. I argue that rising military shares were driven by structural change out of agriculture, and the recent declines are driven by substitution from soldiers towards military goods. I document evidence for this substitution effect: as countries' incomes rise, the ratio of their military expenditure share to their military employment share rises too. I introduce a game theoretic model of growth and warfare that reproduces the time series patterns of military expenditure and employment. The model also correctly predicts the cross-sectional pattern, that military employment and expenditure shares are decreasing in income during wars. Finally, I show that faster economic growth can reduce military expenditure in the long run. |
| JEL: | E10 F51 H56 O40 |
| URL: | http://d.repec.org/n?u=RePEc:ufl:wpaper:001002&r=gro |
| By: | Dittmar, Jeremiah; Meisenzahl, Ralf |
| Abstract: | What are the origins and consequences of the state as a provider of public goods? We study institutional changes that increased state capacity and public goods provision in German cities during the 1500s. Cities that adopted institutional change subsequently began to differentially produce and attract human capital and grow faster. Institutional change occurred where ideological competition introduced by the Protestant Reformation interacted with local politics. We study plagues that shifted local politics in a narrow period as sources of exogenous variation in institutions, and find support for a causal interpretation of the relationship between institutional change, human capital, and growth. |
| Keywords: | education; growth; Human Capital; institutions; Political Economy; Public Goods; State Capacity |
| JEL: | I25 N13 O11 O43 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12037&r=gro |
| By: | Laura Panza (Department of Economics, University of Melbourne); Jeffrey G. Williamson (Harvard University and The University of Wisconsin) |
| Abstract: | Although the Australian historical literature covering the colonies’ first century from the initial convict settlement in 1788 at Botany Bay to the post-gold rush census of 1871 is packed with assertions about Australian living standards and inequality exceptionalism2 – compared with western Europe and America, there has been very little evidence offered to confirm them. This paper will establish the Australian facts about living standards and inequality trends between the 1820s and the 1870s. Where do we find exceptionalism, compared with the United States, and where not? And can exceptionalism be readily explained by the fact that the US was undergoing a dramatic industrial revolution while Australia was following its commodity-exporting comparative advantage? We start by exploring the end-period benchmark, 1871, where previous literature (since Michael Mulhall in 1892) has reported a big Australian income per capita and living standard lead. We ask whether 1871 is a poor choice for making these comparisons, and whether 1861 would be better. The US had just fought a Civil War and underwent a “lost growth decade” and southern destruction in the 1860s (Lindert & Williamson 2016b). In addition, both countries had to deal with a mineral rent bust, one in Victoria and the other in California and Nevada. The result for 1861 without the devastated American south or the mineral-rich Victoria, California, and Nevada is a smaller Australian living standard lead, but a significant lead nonetheless. Next we ask whether Australia was born (relatively) rich or grew (relatively) rich by commodity-export-led (relatively) fast growth. It was the latter, a conclusion reached in two ways, indirectly à la Angus Maddison backcasting and directly à la historic purchasing-power-parity living standard estimates for the early years. Our new purchasing-power-parity estimates of working class living standards in the 1820s and 1830s place Australian towns below London. This not-born-relatively-rich conclusion is confirmed indirectly by an exceptionally fast growth performance between 1821 and 1871. In addition, we ask whether the convicts had similar living standards as free urban unskilled in the 1830s (the convicts were still nearly half of the labor force). We follow this with two additional questions: Was the 1871 Australian distribution of income as unequal as it was in the US and Western Europe then? Or was it exceptionally equal? If the latter, was it also as equal in the 1820s as it was in America in 1800? While we cannot yet answer either question, we can document inequality trends between those two dates by exploiting various proxies. Here we find exceptionalism since there is little evidence supporting rising income inequality over the half-century prior to 1871. |
| Keywords: | N17, N37, O47, O56 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:2027&r=gro |
| By: | Jonathan J Adams (Department of Economics, University of Florida) |
| Abstract: | Advanced economies undergo three transitions during their development: 1. They transition from a rural to an urban economy. 2. They transition from low income growth to high income growth. 3. Their demographics transition from initially high fertility and mortality rates to low modern levels. The timings of these transitions are correlated in the historical development of most advanced economies. I unify complementary theories of the transitions into a nonlinear model of endogenous long run economic and demographic change. The model reproduces the timing and magnitude of the transitions. Because the model captures the interactions between all three transitions, it is able to explain three additional empirical patterns: a declining urban-rural wage gap, a declining rural-urban family size ratio, and most surprisingly, that early urbanization slows development. This third prediction distinguishes the model from other theories of long-run growth, so I test and confirm it in cross-country data. |
| JEL: | E13 J11 N10 O18 O41 |
| URL: | http://d.repec.org/n?u=RePEc:ufl:wpaper:001001&r=gro |
| By: | Emmanuelle Augeraud-Véron (MIA - Mathématiques, Image et Applications - ULR - Université de La Rochelle); Giorgio Fabbri (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille 2 - Université Paul Cézanne - Aix-Marseille 3 - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Katheline Schubert (PSE - Paris School of Economics) |
| Abstract: | This paper presents a benchmark endogenous growth model including biodiversity preservation dynamics. Producing food requires land, and increasing the share of total land devoted to farming mechanically reduces the share of land devoted to biodiversity conservation. However, the safeguarding of a greater number of species is associated to better ecosystem services – pollination, flood control, pest control, etc., which in turn ensure a lower volatility of agricultural productivity. The optimal conversion/preservation rule is explicitly characterized, as well as the value of biological diversity, in terms of the welfare gain of biodiversity conservation. The Epstein-Zin-Weil specification of the utility function allows us to disentangle the effects of risk aversion and aversion to fluctuations. A two-player game extension of the model highlights the effect of volatility externalities and the Paretian sub-optimality of the decentralized choice. |
| Keywords: | biodiversity,stochastic endogenous growth,insurance value,recursive preferences |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01493965&r=gro |
| By: | Jeanne Cilliers (Department of Economic History, Lund University); Johan Fourie (Department of Economics, Stellenbosch University) |
| Abstract: | In the absence of historical income or education data, the change in occupations over time can be used as a measure of social mobility. This paper investigates intergenerational occupational mobility using a novel genealogical dataset for settler South Africa, spanning its transition from an agricultural to an early industrialized society (1800–1909). We identify fathers and sons for whom we have complete information on occupational attainment. We follow a two-generation discrete approach to measure changes in both absolute and relative mobility over time. Consistent with qualitative evidence of a shift away from agriculture as the economy’s dominant sector, we see the farming class shrinking and the skilled and professional classes growing. Controlling for changes in the structure of the labor market over time, we find increasing social mobility, becoming significant after the discovery of minerals in 1868. We find this mobility particularly for semi-skilled workers but virtually no improved mobility for sons of farmers. We also test hypotheses related to the mobility prospects for first-born sons and sons of immigrants. |
| Keywords: | Intergenerational mobility, social mobility, resource curse, industrialization, colonialism, longitudinal data |
| JEL: | J60 J61 J62 N30 N37 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:sza:wpaper:wpapers280&r=gro |
| By: | Diego Ivan Ruge Leiva; Giuseppe Caivano |
| Abstract: | Although a great deal of research has shown how stock markets and banks may relate to economic growth, such studies ignore the role that common shocks play in the finance-growth nexus. Using panels of 54 advanced and emerging economies, and novel common factor frameworks which account for dynamics, reverse causality, observed heterogeneities, and unobserved common shocks which cause error cross-sectional dependencies across countries, we find that stock market development has positive long-term effects on economic growth, while high levels of banking development might be detrimental to overall output. These results also hold for a subsample of advanced countries; however, despite the positive and significant effect that stock market development has on growth for a subsample of emerging countries, the negative effect of bank development is as likely to be significant as insignificant in this case. Moreover, we find that ignoring the strong error cross-sectional dependencies caused by common shocks and/or assuming homogeneous coefficients may yield inconsistent estimates. |
| Keywords: | Economic Growth, Stock Market Development, Banking Development, Cross-Section Dependence, Multifactor Error Structure. |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:uae:wpaper:0317&r=gro |
| By: | Michael A. Stemmer (Centre d'Economie de la Sorbonne) |
| Abstract: | This article provides new evidence on the relationship between financial development and economic growth in 15 Eastern European countries between 1994 and 2014. The analysis employs a panel Granger causality framework that is based on seemingly unrelated regression systems and Wald tests with country-specific bootstrap critical values. By relying on several financial development indicators, we find that finance primarily follows GDP per capita in transition economies, supporting a demand-driven hypothesis. In contrast, financial development in the form of financial monetization and credit extension exerts in the majority of countries a negative impact on economic growth. Moreover, a strong foreign bank presence seems to positively impact growth, presumably driven by more efficiency and prudential lending behavior |
| Keywords: | Economic growth; financial development; transition countries; granger causality; bootstrap |
| JEL: | F43 O10 O11 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:17022&r=gro |
| By: | Margaret McMillan; Dani Rodrik; Claudia Sepulveda |
| Abstract: | Developing countries made considerable gains during the first decade of the 21st century. Their economies grew at unprecedented rates, resulting in large reductions in extreme poverty and a significant expansion of the middle class. But more recently that progress has slowed with an economic environment of lackluster global trade, not enough jobs coupled with skills mismatches, continued globalization and technological change, greater income inequality, unprecedented population aging in richer countries, and youth bulges in the poorer ones. This essay examines how seven key countries fared from 1990-2010 in their development quest. The sample includes seven developing countries—Botswana, Ghana, Nigeria, Zambia, India, Vietnam and Brazil —all of which experienced rapid growth in recent years, but for different reasons. The patterns of growth are analyzed in each of these countries using a unifying framework which draws a distinction between the “structural transformation” and “fundamentals” challenge in growth. Out of these seven countries, the traditional path to rapid growth of export oriented industrialization only played a significant role in Vietnam. |
| JEL: | O11 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23378&r=gro |
| By: | Palakiyem Kpemoua (Université de Lomé - Université de Lomé) |
| Abstract: | The main purpose of this paper is to determine the contribution of each level of education on growth in economic sectors of Togo, and to test the causality between each level of education and the growth in economic sectors, using Solow augmented model with human capital resources, developed by Mankiw and al. (1992). The data cover the period 1984-2014. The methodological approach is based on the cointegration, the causality tests and the fully modified ordinary least square (FMOLS) suggested by Philips and Hansen (1990). Estimates show that, the different levels of education generally, have a positive and significant impact on Togo's economic sectors which (impact) becomes lower as the level of education increases, and show also that the efforts undertaken by the country in terms of extension and accessibility have not been neutral in terms of economic performances. The results of the causality tests indicate a circular causality between economic growth and the primary schooling enrollment, a causality from the gross real added values of agriculture to the primary schooling enrollment and, from industry to the tertiary schooling enrollment on the one hand, from primary schooling enrollment to the gross added values of industry and services on the other hand, according to Toda and Yamamoto(1995). |
| Keywords: | éducation et croissance, capital humain |
| Date: | 2016–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01506650&r=gro |
| By: | Raouf BOUCEKKINE (Aix-Marseille University (Aix-Marseille School of Economics and IMéRA), CNRS and EHESS); Giorgio FABBRI (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS); Salvatore FEDERICO (Università degli Studi di Siena, Dipartimento di Economia Politica e Statistica); Fausto GOZZI (Dipartimento di Economia e Finanza, LUISS Guido Carli, Roma) |
| Abstract: | Abstract. We provide with an optimal growth spatio-temporal setting with capital accumulation and diffusion across space in order to study the link between economic growth triggered by capital spatio-temporal dynamics and agglomeration across space. We choose the simplest production function generating growth endogenously, the AK technology but in sharp contrast to the related literature which considers homogeneous space, we derive optimal location outcomes for any given space distributions for technology (through the productivity parameter A) and population. Beside the mathematical tour de force, we ultimately show that agglomeration may show up in our optimal growth with linear technology, its exact shape depending on the interaction of two main effects, a population dilution effect versus a technology space discrepancy effect. |
| Keywords: | Growth, agglomeration, heterogeneous and continuous space, capital mobility, infinite dimensional optimal control problems |
| JEL: | R1 O4 C61 |
| Date: | 2017–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2017006&r=gro |
| By: | Michael Stemmer (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This article provides new evidence on the relationship between financial development and economic growth in 15 Eastern European countries between 1994 and 2014. The analysis employs a panel Granger causality framework that is based on seemingly unrelated regression systems and Wald tests with country-specific bootstrap critical values. By relying on several financial development indicators, we find that finance primarily follows GDP per capita in transition economies, supporting a demand-driven hypothesis. In contrast, financial development in the form of financial monetization and credit extension exerts in the majority of countries a negative impact on economic growth. Moreover, a strong foreign bank presence seems to positively impact growth, presumably driven by more efficiency and prudential lending behavior. |
| Keywords: | Economic growth,financial development,transition countries,granger causality,bootstrap |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-01524462&r=gro |
| By: | Bianco, Dominique |
| Abstract: | In this paper, we analyze the long-term impact of an environmental policy on economic growth, pollution and welfare. A standard growth model with horizontal innovation is modified by including pollution which comes from the use of intermediate goods production. Taxation on pollution reduces profits of final good producer as well as intermediate good producers. In this setting, profit gains is explained by a realloaction of labor from intermediate goods sector to R&D sector which enhances innovation, growth and welfare while it reduces pollution. |
| Keywords: | Porter hypothesis, endogenous growth, environmental policy |
| JEL: | D43 O31 O41 Q58 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:79300&r=gro |
| By: | Diego Ivan Ruge Leiva; Giuseppe Caivano |
| Abstract: | This is an supplement to the paper by Ruge-Leiva and Caivano (2017) “Stock Markets, Banks and Economic Growth in a Context of Common Shocks and Cross-Country Dependencies”, which provides additional findings and figures, unit root test results, cross-section dependence test results, tables of data collection and additional descriptive statistics. |
| Keywords: | Economic Growth, Stock Market Development, Banking Development, Cross-Section Dependence, Multifactor Error Structure. |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:uae:wpaper:0417&r=gro |