nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒07‒09
seven papers chosen by
Marc Klemp
Brown University

  1. Innovation and inequality in a small world By Lindner, Ines; Strulik, Holger
  2. The Cultural Roots of Human Capital Accumulation By van Hoorn, Andre
  3. Aid and growth.New evidence using an excludable instrument By Dreher, Axel; Langlotz, Sarah
  4. A replication of "Education and catch-up in the Industrial Revolution" (American Economic Journal: Macroeconomics, 2011) By Edwards, Jeremy S. S.
  5. The African origins of Euro-American development: Pins on an empirical roadmap By Amavilah, Voxi Heinrich
  6. Determinants of technology catch-up in MENA and SSA countries: a panel data analysis By Francisco Serranito
  7. Inequality and Expectations in a Model of Technology Adoption and Growth By Surbhi Badhwar; Mausumi Das

  1. By: Lindner, Ines; Strulik, Holger
    Abstract: We present a multi-country theory of economic growth and R&Ddriven technological progress in which countries are connected by a network of knowledge exchange. Technological progress in any country depends on the state of technology in the countries it exchanges knowledge with. The diffusion of knowledge throughout the world explains a period of increasing world inequality after the take-off of the forerunners of the industrial revolution, followed by decreasing relative inequality. Knowledge diffusion through a Small World network produces an extraordinary diversity of country growth performances, including the overtaking of individual countries and the replacement of the technologically leading country in the course of world development.
    Keywords: networks,knowledge diffusion,economic growth,world income distribution
    JEL: O10 O40 D85 F43
    Date: 2017
  2. By: van Hoorn, Andre
    Abstract: While the accumulation of human capital is widely recognized as a key driver of economic development, what drives cross-country differences in human capital accumulation remains little understood. I use an epidemiological approach involving migrants to test for a possible cultural gradient in individuals’ propensity towards human capital accumulation. However, advancing on traditional macro-focused epidemiological culture research, I also explore a specific micro-level channel through which country-of-origin culture affects human capital accumulation involving culture’s effect on individuals’ dispositions. Results confirm a cultural gradient in the propensity towards human capital accumulation. Moreover, part of the effect of culture on migrants’ propensity towards human capital accumulation runs through migrants’ personal dispositions. Finally, culture’s effect on human capital accumulation traces back to cultural differences in emphasis on intellectual autonomy and future orientation. I conclude that understanding countries’ differential development experiences requires detailed study of the various micro channels through which culture can have macroeconomic consequences.
    Keywords: Culture; skill accumulation; epidemiological approach; intellectual autonomy; microfoundations
    JEL: I20 O10 Z0
    Date: 2016
  3. By: Dreher, Axel; Langlotz, Sarah
    Abstract: We use an excludable instrument to test the effect of bilateral foreign aid on economic growth in a sample of 96 recipient countries over the 1974-2009 period. We interact donor government fractionalization with a recipient country’s probability of receiving aid. The results show that fractionalization increases donors’ aid budgets, representing the over-time variation of our instrument, while the probability of receiving aid introduces variation across recipient countries. Controlling for country- and period-specific effects that capture the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Making use of the instrument, our results show no significant effect of aid on growth in the overall sample. We also investigate the effect of aid on consumption, savings, and investments, and split the sample according to the quality of economic policy, democracy, and the Cold War period. With the exception of the post-Cold War period (where abundant aid reduces growth), we find no significant effect of aid on growth in any of these sub-samples. None of the other outcomes are affected by aid.
    Keywords: aid effectiveness; government fractionalization; economic growth
    Date: 2017–06–28
  4. By: Edwards, Jeremy S. S.
    Abstract: Although European economic history provides essentially no support for the view that education of the general population has a positive causal effect on economic growth, a recent paper by Becker, Hornung and Woessmann (Education and catch-up in the Industrial Revolution, 2011) claims that such education had a significant impact on Prussian industrialisation. The author shows that the instrumental variable they use to identify the causal effect of education is correlated with variables that influenced industrialisation but were omitted from their regression models. Once this specification error is corrected, the evidence shows that education of the general population had, if anything, a negative causal impact on industrialisation in Prussia.
    Keywords: education,industrialization,Prussia,regional effects,invalid instrument
    JEL: I25 N13 N63 O14
    Date: 2017
  5. By: Amavilah, Voxi Heinrich
    Abstract: Despite their obvious ideological bends, economic studies of the interactions between Africa and “developed” Europe and America (Euro-America) have been decidedly lopsided. Existing studies conceive the effects of the interactions to be unidirectional, with Africa always on the receiving end in both good and bad ways. The conception is incorrect; it lacks the appreciation that the effects are interactive, mutual, dynamic, and simultaneous. Thus, I argue that contrary to the extant literature, the development of Euro-America has origins in Africa through the mechanism of mercantile, slave, and free trade. For example, the growth of colonial Britain depended on foreign trade with the Americas – exports of manufactured goods and imports of raw materials. In turn, American raw materials were produced by African slave labor. When slavery ended African raw materials began to flow to Euro-America in greater amounts than before, replacing slave labor. The result was a smooth transition from a slave-labor-based economy to a modern economy in Euro-America, and a stunted economy in Africa. The objective of this paper is to sketch how one might go about illustrating such effects in a simple quantitative way. In other words, it puts some pins to suggest a roadmap for empirical studies. To do so, first I review very briefly the history of African and Euro-American interactions. Second, I attempt to establish the channels of interactions. Third, I construct a simple model for measuring Africa’s effects on Euro-American development as a system of three seemingly unrelated equations, which can be estimated individually and/or simultaneously. Fourth, I indicate the challenges and methods for generating the data required to implement the model empirically. While this version of the paper is unaccompanied by its empirical counterpart, it is nonetheless clear that at least some of the origins of Euro-American development are African.
    Keywords: African origins of Euro-American development, growth and development, growth and change
    JEL: N13 O33 O47 O55 P16 P51 P52
    Date: 2017–06–28
  6. By: Francisco Serranito (Centre d'Economie de l'Université de Paris Nord (CEPN))
    Abstract: This paper aims at testing the determinants of TFP in the case of a panel of African and Middle-East countries for the period 1970-2010. We get two main results. Firstly, the degree of openness of a country is the only variables that have a positive and robust effect on the TFP growth. Secondly, convergence is not an automatic phenomenon for all countries. The possibility of a convergence effect depends on the ability of countries to adopt foreign technology. The absorptive capacity depends on the stock of human capital and the degree of financial market development.
    Keywords: Technology gap, Catching-up, Dynamic Panel Data, GMM estimation, Middle-East and North Africa, Sub-Saharan African countries
    JEL: I2 O1 O3 O4
    Date: 2017–06
  7. By: Surbhi Badhwar (Department of Economics, Delhi School of Economics); Mausumi Das (Department of Economics, Delhi School of Economics)
    Abstract: This paper highlights the role of initial wealth inequality in determining the technology adoption decision of firms, which in turn impacts upon the overall productivity in an economy. Wealth inequality interacts with producers’ expectations to generate mutiple equilibria: poor economies where initial wealth inequality is too high are perpetually stuck at a bad equilibrium with poor technology- economies with moderate degree of inequality can oscillate between the bad and the good equilibria depending on producers’ expectations- and rich economies with sufficiently low degree of wealth inequality always enjoy a self-sustaining good equilibrium, characterized by the adoption of advanced technology.
    Date: 2017–04

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